DFSA has issued a report on the assessment of Liquidity Coverage Ratio implementation.

The Dubai Financial Services Authority (DFSA) has recently released a report assessing the implementation of the Liquidity Coverage Ratio (LCR) within the Dubai International Financial Centre (DIFC). The report provides valuable insights into the liquidity positions of firms operating within or from the DIFC. It identifies areas where firms need to improve their liquidity management and shares best practices observed during the assessment.

Liquidity risk is crucial for financial institutions, particularly those involved in financial intermediation and deposit-taking activities. The DFSA, as the financial regulator of the DIFC, is dedicated to ensuring that institutions have robust defenses against liquidity risks. It imposes specific quantitative measures on certain firms and requires them to maintain strong internal systems, controls, and governance arrangements. These efforts, combined with the DFSA’s risk-based supervisory work, contribute to the overall stability of the DIFC.

The DFSA recently conducted a thorough review of liquidity risk for firms subject to the LCR requirements. This review aimed to evaluate current practices, their effectiveness, and areas for improvement. Justin Baldacchino, Managing Director of Supervision at the DFSA, emphasized the importance of sound liquidity management for firms in the DIFC. Given the potential rapid unfolding of liquidity issues, the DFSA remains committed to maintaining the highest financial regulatory standards in the DIFC, creating a secure and resilient financial environment.

Firms subject to the LCR requirement should carefully review the report, consider the findings, and take necessary actions to address any identified deficiencies. This proactive approach is essential to ensure robust liquidity management practices within their operations.