The Dubai Financial Services Authority (DFSA) has published Consultation Paper 167 proposing enhancements to the DFSA Rulebook to further align it with the Basel Core Principles for Effective Banking Supervision. The proposals primarily apply to Authorised Firms in prudential Categories 1, 2 and 5, with some risk management-related clarifications extending more broadly depending on the specific measure. Key proposals cover risk governance, credit risk and provisioning, concentration risk, and related person transactions. For risk management, the DFSA proposes clearer governing body responsibilities for risk culture, strengthened second line of defence arrangements including a dedicated risk management function for large and complex firms, tighter expectations for management information systems including risk data aggregation and reporting for Categories 1, 2 and 5, and expanded governing body approval requirements for major product and business changes. For credit risk, the package would remove outdated minimum provisioning rules based solely on days past due, formalise the International Financial Reporting Standards 9 expected credit loss framework within the prudential rules including explicit Tier 2 capital treatment for provisions, introduce minimum governance and controls around the use of provisioning models, add clearer exposure classification expectations including non-performing and forborne exposures, and strengthen documentation and board reporting requirements. The DFSA also proposes broadening the definition of concentration risk beyond large exposures, and tightening related person rules by adding “affiliate” to the definition of Related Persons, extending the arm’s length requirement to all related person transactions, and requiring governing body approval rather than delegation for related person exposures and write-offs above thresholds. Comments are due by 05 September 2025. Subject to the consultation outcome, the DFSA proposes bringing the new Rules and Guidance into force on 2 July 2026 and will publish the final Rulebook modules and a website notice once changes are made.

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