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  • CA-4.2 CA-4.2 Specific risk calculation

    • CA-4.2.1

      The capital charge for specific risk is designed to protect against a movement in the price of an individual instrument, owing to factors related to the individual issuer.

      October 07

    • CA-4.2.2

      In measuring the specific risk for interest rate related instruments, a bank may net, by value, long and short positions (including positions in derivatives) in the same debt instrument to generate the individual net position in that instrument. Instruments will be considered to be the same where the issuer is the same, they have an equivalent ranking in a liquidation, and the currency, the coupon and the maturity are the same.

      October 07

    • CA-4.2.3

      The specific risk capital requirement is determined by weighting the current market value of each individual net position, whether long or short, according to its allocation among the following five broad categories:

      (a) Eligible central government debt instrument 0.00%
      (b) Qualifying items with residual maturity up to 6 months 0.25%
      (c) Qualifying items with residual maturity between 6 and 24 months 1.00%
      (d) Qualifying items with residual maturity exceeding 24 months 1.60%
      (e) Non-qualifying items 8.00%
      October 07

    • CA-4.2.4

      Eligible central 'government' debt instruments will include all forms of government paper, including bonds, treasury bills and other short-term instruments, but the Central Bank reserves the right to apply a specific risk weight to securities issued by certain foreign governments, especially to securities denominated in a currency other than that of the issuing government.

      October 07

    • CA-4.2.5

      Governments eligible are those which are members of either the Gulf Co-operation Council (GCC) or the Organisation for Economic Co-operation and Development (OECD).

      October 07

    • CA-4.2.6

      The 'qualifying' Category includes securities issued by or fully guaranteed by public sector entities and multilateral development banks (refer to Appendix CA-2), plus other securities that are:

      (a) Rated investment grade by at least two internationally recognised credit rating agencies (to be agreed with the Central Bank); or
      (b) Deemed to be of comparable investment quality by the reporting bank, provided that the issuer is rated investment grade by at least two internationally recognised credit rating agencies (to be agreed with the Central Bank); or
      (c) Rated investment grade by one credit rating agency and not less than investment grade by any internationally recognised credit rating agencies (to be agreed with the Central Bank); or
      (d) Unrated (subject to the approval of the Central Bank), but deemed to be of comparable investment quality by the reporting bank and where the issuer has securities listed on a recognised stock exchange, may also be included.
      October 07