© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE and member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Basel in a boxKPMG in the UAE

April 2017

What kind of tools do we need?— Develop proper risk measurement

tools to improve the bank’s ability to identify, measure and manage risk under Basel III.

What does our board need to do?— Assess whether the new

requirements from the CBUAE are being met

— Implement measures for meeting minimum compliance with the new standards

1© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE and member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Basel in a boxThe Central Bank of the UAE (CBUAE) recently released Circular 52, regulations on capital adequacy. This is the CBUAE’s response to Basel III definitions of capital and minimum capital requirements. Some UAE banks continue to face challenges complying with all Basel II requirements. Changes have been introduced to strengthen banks’ capital bases.

New risk management standards and guidelines will soon be released by the CBUAE. UAE banks will shortly need to comply with these requirements.

KPMG’s Basel in a box has been used by some of the world’s largest banks to ensure they comply with a changing regulatory landscape. KPMG’s Basel in a box includes:

— A readiness assessment module— A holistic risk management framework review — Comprehensive RWA and capital projections— Detailed action plans — Implementation roadmaps

Requirements

All UAE banks must:

— Consider enhanced governance standards and new risk management processes

— Evaluate new regulations for risk management

— Evaluate new regulations for operational risk, market risk and IRRBB

— Consider a sanity check on full Basel II compliance

— Adopt the revised Capital definitions

— Revise qualitative amendments for material risks

— Comply with new local liquidity requirements

— Decide whether to adopt LCR & NSFR

— Meeting the new 3% Leverage Ratio

— Stress test for multiple, more sophisticated scenarios

— Update RWA engine calculations

— Review and expand the ICAAP process

— Consider changes to the Pillar 1 Credit Risk Framework

— Consider changes to the Pillar 1 Operational Risk Framework

Challenges

Financial risk management

© 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE and member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Why KPMG?— KPMG has been the sole Basel project advisor for some of the

world’s largest banks.— Basel in a box has been used to assess Basel readiness at

two of the world’s three largest banks.— Our multi-disciplined specialists can add value to Basel III

programs.— We regularly communicate with regulators in several jurisdictions,

including the GCC countries, helping us to understand the impact on banks of introducing similar regulations.

How we can help:

Do we have adequate controls?— Reinforce risk management and

internal control

— Sufficient and skilled resources to conduct internal reviews around the whole Basel II and Basel III Program

Assess the impact of new capital rules and risk management framework guidelines

Assess compliance with the new standards using detailed guidelines for specific risks

Develop practical action plans that translate into an implementation roadmap and timetable

Tailor Basel III training sessions to help banks understand and interpret the new requirements

Use the Basel in a box capital projection toolkit to determine the impact on a bank’s capital management process

Analyze the impact of both local Basel rules and BIS regulatory capital calculations and rules

3

What about our capital situation?— Assess the impact of Basel II and

Basel III on capital adequacy and consider changes to growth and capital strategies

What about our IT systems and data?

— Strengthen data management to effectively resolve the problem of missing and low quality data

— Improve IT systems to facilitate implementation of metrics like NSFR

2 © 2017 KPMG Lower Gulf Limited and KPMG LLP, operating in the UAE and member firms of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Financial risk management

Introducing… KPMG’s Basel in a box

References to 250 new Basel III requirements

Action plan and implementation roadmap

Comprehensive Basel gap analysis

Assessment of possible Basel IV implications

Holistic and real time CAR calculations

Five year capital projections

Liquidity ratios - LCR and NSFR

Leverage ratios

1 52 63 74 8

Contact us:Emilio PeraPartner | Head of Financial Services+971 56 5085073emiliopera@kpmg.com

Luke EllyardPartner | Head of Audit | Financial Services | UAE+971 50 2402553 lellyard@kpmg.com

Steve PunchDirector | Financial Risk Management | Financial Services+971 56 2182857spunch1@kpmg.com

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

© 2017 KPMG Lower Gulf Limited, operating in the Oman and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Oman.

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