The Dubai Financial Services Authority (DFSA) will implement significant amendments to the Prudential – Investment, Insurance Intermediation and Banking Business (PIB) Rules effective 1 July 2026. These changes will affect how Authorised Firms calculate their regulatory capital requirements, the composition of capital resources, and the application of the new Activity-Based Capital Requirement (ABCR).
Firms should assess the impact of these changes well in advance, as they may result in materially higher capital requirements for certain business models.
Changes to Capital Requirements
From 1 July 2026, an Authorised Firm’s capital requirement will be the highest of the following:
- Base Capital Requirement (BCR)
- Expenditure-Based Capital Minimum (EBCM), where applicable
- Activity-Based Capital Requirement (ABCR), where applicable
- For Money Services Providers:
- Stored Value Capital Requirement (SVCR)
- Transaction-Based Capital Requirement (TBCR)
- Or a combination of both where relevant
This revised framework links regulatory capital more closely to the scale and nature of a firm’s activities.
Introduction of Activity-Based Capital Requirements (ABCR)
ABCR will apply to many firms in Categories 3A, 3B and 3C, subject to limited exemptions.
The requirement is designed to ensure that firms with greater levels of client assets, managed assets, or transaction activity maintain proportionately higher levels of capital.
Monthly Calculation Requirement
ABCR must be calculated on the first business day of each month, and the resulting amount will form part of the firm’s capital requirement for that month.
ABCR Components
ABCR is calculated as the sum of three capital charges:
1. Assets Safeguarded and Administered (ASA)
Capital charge equal to 0.06% of Average ASA.
ASA generally includes:
- Client Assets held under the Client Assets Rules
- Fund Property for which the firm has investor responsibility
- Fund Property safeguarded and administered by the firm
2. Assets Under Management (AUM)
Capital charge equal to 0.02% of Average AUM.
AUM includes:
- Discretionary portfolio management
- Certain ongoing non-discretionary advisory arrangements that create ongoing asset management exposure
3. Client Orders Handled (COH)
Capital charge equal to:
- 0.10% of average Cash Trades handled; plus
- 0.01% of average Derivative Trades handled
Derivative transactions are measured using notional values, with additional adjustments for certain interest rate derivatives.
Important Considerations
While some firms may assume ABCR applies only to asset managers, the scope is broader than many expect.
In particular:
- Firms providing discretionary portfolio management will generally fall within ABCR.
- Advisory firms may also be subject to ABCR where their advisory activities result in assets being managed on an ongoing basis.
- Firms with significant custody, fund administration, or client asset activities may experience a material increase in their capital requirements.
Changes to Capital Composition Requirements
The DFSA has also strengthened requirements regarding the quality of capital maintained by firms.
Where a firm’s capital requirement is determined by EBCM, ABCR, SVCR, or TBCR, the firm must maintain:
- Common Equity Tier 1 (CET1) Capital of at least 60% of the applicable capital requirement; and
- Tier 1 Capital of at least 80% of the applicable capital requirement.
These requirements apply in addition to the overall capital adequacy obligation.
Impact on Money Services Providers
Money Services Providers face additional prudential obligations from 1 July 2026.
Depending on the activities undertaken, firms may be required to maintain:
- A Stored Value Capital Requirement;
- A Transaction-Based Capital Requirement; or
- Both requirements simultaneously.
This may result in a significant increase in capital requirements for firms operating payment services and stored value arrangements.
What Firms Should Do Now
With the implementation date now in effect, firms should:
- Assess whether ABCR applies to their business model
- Review ASA, AUM, and COH measurement methodologies
- Model the expected impact on regulatory capital requirements
- Review CET1 and Tier 1 capital adequacy
- Update capital planning and forecasting models
- Enhance governance and management reporting processes
- Ensure monthly ABCR calculations can be produced accurately and consistently
Early assessment is particularly important for firms with significant client assets, managed assets, custody arrangements, or transaction volumes.
How Re/think can help
Rethink supports DFSA-regulated firms with prudential compliance, Finance Officer services, capital adequacy assessments, and regulatory reporting.
Our team can assist with:
- ABCR impact assessments
- Capital adequacy reviews
- PIB and EPRS reporting
- Capital planning and forecasting
- Finance Officer support
- Governance and implementation planning
If you would like to understand how the new DFSA capital requirements affect your firm, please contact our team for an initial assessment.
Who we are
Re/think is an award-winning regional multi-service business advisory and outsourced services firm providing accounting, regulatory and compliance, tax and VAT advisory, audit, HR consultancy and recruitment services to regulated firms, multi- and single-family offices, and other operating businesses.
Established in the UAE in 2013, the firm has 80+ staff across three offices in Dubai and Abu Dhabi providing clients with timely, proactive and customized business solutions – from set-up and early development to the latest stages of a business lifecycle.
