The Dubai Financial Services Authority (DFSA) today published a report on the Assessment of the Implementation of the Liquidity Coverage Ratio (LCR), offering valuable insights into the liquidity profile of firms operating in or from the Dubai International Financial Centre (DIFC).

The report highlights key findings, including areas where firms need to take action to enhance their liquidity management. It also shares best practices observed during the review.

Liquidity risk is key for institutions engaged in financial intermediation, such as those that accept deposits. As the financial regulator of the DIFC, the DFSA is committed to ensuring that institutions maintain strong defences against these risks. To address them, it imposes specific quantitative measures on certain firms. These measures are part of a broader framework requiring firms to maintain robust internal systems, controls and governance arrangements. These efforts are supported by the DFSA’s risk-based supervisory work, which together contribute to the overall soundness of the DIFC.

Over the recent months, the DFSA conducted an in-depth thematic review of the liquidity risk of firms subject to the LCR to assess the adequacy of their implementation of the requirements set out in the PIB Module of the DFSA Rulebook. This review aimed to evaluate the effectiveness of current practices and identify areas for improvement.

Justin Baldacchino, Managing Director of Supervision at the DFSA, said: “The DFSA puts the utmost importance to the sound management of liquidity for firms operating in the DIFC. One cannot become complacent with liquidity risk given the speed at which liquidity issues can unfold. We are committed to maintaining the highest standards of financial regulation and oversight within the DIFC, fostering a secure and resilient financial environment.”

DFSA firms that are subject to the LCR requirement should review the report, consider the findings, and implement the necessary actions to remedy identified deficiencies. This proactive approach is essential to ensure robust liquidity management practices are in place.

To access the full report, click here.