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  • CA-5.2 CA-5.2 Mechanics of the IRB Approach

    • CA-5.2.1

      In sub-section 1, the risk components (e.g. PD and LGD) and asset classes (e.g. corporate exposures and retail exposures) of the IRB approach are defined. Sub-section 2 provides a description of the risk components to be used by banks by asset class. Sub-sections 3 and 4 discuss a bank's adoption of the IRB approach and transitional arrangements, respectively. In cases where an IRB treatment is not specified, the risk weight for those other exposures is 100%, except when a 0% risk weight applies under the standardised approach, and the resulting risk-weighted assets are assumed to represent UL only.

      Apr 08

    • 1. Categorisation of Exposures

      • CA-5.2.2

        Under the IRB approach, banks must categorise banking-book exposures into broad classes of assets with different underlying risk characteristics, subject to the definitions set out below. The classes of assets are (a) corporate, (b) sovereign, (c) bank, (d) retail, and (e) equity. Within the corporate asset class, five sub-classes of specialised lending are separately identified. Within the retail asset class, three sub-classes are separately identified. Within the corporate and retail asset classes, a distinct treatment for purchased receivables may also apply provided certain conditions are met.

        Apr 08

      • CA-5.2.3

        Some banks may use different classifications to those listed above in their internal risk management and measurement systems. While it is not the intention of the CBB to require banks to change the way in which they manage their business and risks, banks are required to apply the appropriate treatment to each exposure for the purposes of deriving their minimum capital requirement. Banks must demonstrate to CBB that their methodology for assigning exposures to different classes is appropriate and consistent over time.

        Apr 08

      • CA-5.2.4

        For a discussion of the IRB treatment of securitisation exposures, see chapter CA-6.

        Apr 08

      • (i) Definition of Corporate Exposures

        • CA-5.2.5

          In general, a corporate exposure is defined as a debt obligation of a corporation, partnership, or proprietorship. Banks are permitted to distinguish separately exposures to small- and medium-sized entities (SME), as defined in paragraph CA-5.3.4.

          Apr 08

        • CA-5.2.6

          Within the corporate asset class, five sub-classes of specialised lending (SL) are identified. Such lending possesses all the following characteristics, either in legal form or economic substance:

          (a) The exposure is typically to an entity (often a special purpose entity (SPE)) which was created specifically to finance and/or operate physical assets;
          (b) The borrowing entity has little or no other material assets or activities, and therefore little or no independent capacity to repay the obligation, apart from the income that it receives from the asset(s) being financed;
          (c) The terms of the obligation give the lender a substantial degree of control over the asset(s) and the income that it generates; and
          (d) As a result of the preceding factors, the primary source of repayment of the obligation is the income generated by the asset(s), rather than the independent capacity of a broader commercial enterprise.
          Apr 08

        • CA-5.2.7

          The five sub-classes of specialised lending are project finance, object finance, commodities finance, income-producing real estate, and high-volatility commercial real estate. Each of these sub-classes is defined below.

          Apr 08

        • Project Finance

          • CA-5.2.8

            Project finance (PF) is a method of funding in which the lender looks primarily to the revenues generated by a single project, both as the source of repayment and as security for the exposure. This type of financing is usually for large, complex and expensive installations that might include, for example, power plants, chemical processing plants, mines, transportation infrastructure, environment, and telecommunications infrastructure. Project finance may take the form of financing of the construction of a new capital installation, or refinancing of an existing installation, with or without improvements.

            Apr 08

          • CA-5.2.9

            In such transactions, the lender is usually paid solely or almost exclusively out of the money generated by the contracts for the facility's output, such as the electricity sold by a power plant. The borrower is usually an SPE that is not permitted to perform any function other than developing, owning, and operating the installation. The consequence is that repayment depends primarily on the project's cash flow and on the collateral value of the project's assets. In contrast, if repayment of the exposure depends primarily on a well established, diversified, credit-worthy, contractually obligated end user for repayment, it is considered a secured exposure to that end-user.

            Apr 08

        • Object Finance

          • CA-5.2.10

            Object finance (OF) refers to a method of funding the acquisition of physical assets (e.g. ships, aircraft, satellites, railcars, and fleets) where the repayment of the exposure is dependent on the cash flows generated by the specific assets that have been financed and pledged or assigned to the lender. A primary source of these cash flows might be rental or lease contracts with one or several third parties. In contrast, if the exposure is to a borrower whose financial condition and debt-servicing capacity enables it to repay the debt without undue reliance on the specifically pledged assets, the exposure should be treated as a collateralised corporate exposure.

            Apr 08

        • Commodities Finance

          • CA-5.2.11

            Commodities finance (CF) refers to structured short-term lending to finance reserves, inventories, or receivables of exchange-traded commodities (e.g. crude oil, metals, or crops), where the exposure will be repaid from the proceeds of the sale of the commodity and the borrower has no independent capacity to repay the exposure. This is the case when the borrower has no other activities and no other material assets on its balance sheet. The structured nature of the financing is designed to compensate for the weak credit quality of the borrower. The exposure's rating reflects its self-liquidating nature and the lender's skill in structuring the transaction rather than the credit quality of the borrower.

            Apr 08

          • CA-5.2.12

            The CBB believes that such lending can be distinguished from exposures financing the reserves, inventories, or receivables of other more diversified corporate borrowers. Banks are able to rate the credit quality of the latter type of borrowers based on their broader ongoing operations. In such cases, the value of the commodity serves as a risk mitigant rather than as the primary source of repayment.

            Apr 08

        • Income-producing Real Estate

          • CA-5.2.13

            Income-producing real estate (IPRE) refers to a method of providing funding to real estate (such as, office buildings to let, retail space, multifamily residential buildings, industrial or warehouse space, and hotels) where the prospects for repayment and recovery on the exposure depend primarily on the cash flows generated by the asset. The primary source of these cash flows would generally be lease or rental payments or the sale of the asset. The borrower may be, but is not required to be, an SPE, an operating company focused on real estate construction or holdings, or an operating company with sources of revenue other than real estate. The distinguishing characteristic of IPRE versus other corporate exposures that are collateralised by real estate is the strong positive correlation between the prospects for repayment of the exposure and the prospects for recovery in the event of default, with both depending primarily on the cash flows generated by a property.

            Apr 08

        • High-volatility Commercial Real Estate

          • CA-5.2.14

            High-volatility commercial real estate (HVCRE) lending is the financing of commercial real estate that exhibits higher loss rate volatility (i.e. higher asset correlation) compared to other types of SL. HVCRE includes:

            (a) Commercial real estate exposures secured by properties of types that are categorised by the CBB periodically as sharing higher volatilities in portfolio default rates;
            (b) Loans financing any of the land acquisition, development and construction (ADC) phases for properties of those types in such jurisdictions; and
            (c) Loans financing ADC of any other properties where the source of repayment at origination of the exposure is either the future uncertain sale of the property or cash flows whose source of repayment is substantially uncertain (e.g. the property has not yet been leased to the occupancy rate prevailing in that geographic market for that type of commercial real estate), unless the borrower has substantial equity at risk.
            Apr 08

          • CA-5.2.15

            Where other supervisors categorise certain types of commercial real estate exposures as HVCRE in their jurisdictions, Bahraini banks are also required to classify such exposures in those jurisdictions as HVCRE.

            Apr 08

      • (ii) Definition of Sovereign Exposures

        • CA-5.2.16

          This asset class covers all exposures to counterparties treated as sovereigns under the standardised approach. This includes sovereigns (and their central banks), certain PSEs identified as sovereigns in the standardised approach, MDBs that are given a 0% risk weight under the standardised approach, and the entities referred to in paragraph CA-3.2.3.

          Apr 08

      • (iii) Definition of Bank Exposures

        • CA-5.2.17

          This asset class covers exposures to banks and those investment firms outlined in paragraph CA-3.2.13. Bank exposures also include claims on domestic PSEs that are treated like claims on banks under the standardised approach, and MDBs that are not assigned a 0% risk weight under the standardised approach.

          Apr 08

      • (iv) Definition of Retail Exposures

        • CA-5.2.18

          An exposure is categorised as a retail exposure if it meets all of the following criteria:

          Nature of Borrower or Low Value of Individual Exposures

          (a) Exposures to individuals — such as revolving credits and lines of credit (e.g. credit cards, overdrafts, and retail facilities secured by financial instruments) as well as personal term loans and leases (e.g. installment loans, auto loans and leases, student and educational loans, personal finance, and other exposures with similar characteristics). There will be an exposure threshold of BD250,000 to distinguish between retail and corporate exposures;
          (b) Residential mortgage loans (including first and subsequent liens, term loans and revolving home equity lines of credit) are eligible for retail treatment regardless of exposure size so long as the credit is extended to an individual that is an owner- occupier of the property (with buildings containing only a few rental units — otherwise they are treated as corporate). Loans secured by a single or small number of condominium or co-operative residential housing units in a single building or complex also fall within the scope of the residential mortgage category. CBB may set limits on the maximum number of housing units per exposure, on a case by case basis;
          (c) Loans extended to small businesses and managed as retail exposures are eligible for retail treatment provided the total exposure of the banking group to a small business borrower (on a consolidated basis where applicable) is less than BD 250,000 . Small business loans extended through or guaranteed by an individual are subject to the same exposure threshold; and
          (d) CBB will provide flexibility in the practical application of such thresholds such that banks are not forced to develop extensive new information systems simply for the purpose of ensuring perfect compliance. CBB will however, check on regular basis to ensure that such flexibility (and the implied acceptance of exposure amounts in excess of the thresholds that are not treated as violations) is not being abused.
          Amended: April 2011
          Apr 08

        • Large Number of Exposures

          • CA-5.2.19

            The exposure must be one of a large pool of exposures, which are managed by the bank on a pooled basis. CBB may, on a case by case basis, set a minimum number of exposures within a pool for exposures in that pool to be treated as retail:

            (a) Small business exposures below BD 250,000 may be treated as retail exposures if the bank treats such exposures in its internal risk management systems consistently over time and in the same manner as other retail exposures. This requires that such an exposure be originated in a similar manner to other retail exposures. Furthermore, it must not be managed individually in a way comparable to corporate exposures, but rather as part of a portfolio segment or pool of exposures with similar risk characteristics for purposes of risk assessment and quantification. However, this does not preclude retail exposures from being treated individually at some stages of the risk management process. The fact that an exposure is rated individually does not by itself deny the eligibility as a retail exposure.
            Amended: April 2011
            Apr 08

          • CA-5.2.20

            Within the retail asset class category, banks are required to identify separately three sub-classes of exposures: (a) exposures secured by residential properties as defined above, (b) qualifying revolving retail exposures, as defined in the following paragraph, and (c) all other retail exposures.

            Apr 08

      • (v) Definition of Qualifying Revolving Retail Exposures

        • CA-5.2.21

          All of the following criteria must be satisfied for a sub-portfolio to be treated as a qualifying revolving retail exposure (QRRE). These criteria must be applied at a sub-portfolio level consistent with the bank's segmentation of its retail activities generally. Segmentation at the national or country level (or below) should be the general rule:

          (a) The exposures are revolving, unsecured, and uncommitted (both contractually and in practice). In this context, revolving exposures are defined as those where customers' outstanding balances are permitted to fluctuate based on their decisions to borrow and repay, up to a limit established by the bank;
          (b) The exposures are to individuals;
          (c) The maximum exposure to a single individual in the sub-portfolio is BD 25,000 or less;
          (d) Because the asset correlation assumptions for the QRRE risk-weight function are markedly below those for the other retail risk-weight function at low PD values, banks must demonstrate that the use of the QRRE risk-weight function is constrained to portfolios that have exhibited low volatility of loss rates, relative to their average level of loss rates, especially within the low PD bands. CBB will review the relative volatility of loss rates across the QRRE subportfolios, as well as the aggregate QRRE portfolio;
          (e) Data on loss rates for the sub-portfolio must be retained in order to allow analysis of the volatility of loss rates; and
          (f) CBB must concur that treatment as a qualifying revolving retail exposure is consistent with the underlying risk characteristics of the sub-portfolio.
          Amended: April 2011
          Apr 08

      • (vi) Definition of Equity Exposures

        • CA-5.2.22

          In general, equity exposures are defined on the basis of the economic substance of the instrument. They include both direct and indirect ownership interests,31 whether voting or non-voting, in the assets and income of a commercial enterprise or of a financial institution that is not consolidated or deducted pursuant to Prudential Consolidation and Deduction Requirements Module. An instrument is considered to be an equity exposure if it meets all of the following requirements:

          (a) It is irredeemable in the sense that the return of invested funds can be achieved only by the sale of the investment or sale of the rights to the investment or by the liquidation of the issuer;
          (b) It does not embody an obligation on the part of the issuer; and
          (c) It conveys a residual claim on the assets or income of the issuer.

          31 Indirect equity interests include holdings of derivative instruments tied to equity interests, and holdings in corporations, partnerships, limited liability companies or other types of enterprises that issue ownership interests and are engaged principally in the business of investing in equity instruments.

          Apr 08

        • CA-5.2.23

          Additionally any of the following instruments must be categorised as an equity exposure:

          (a) An instrument with the same structure as those permitted as Tier 1 capital for banking organisations;
          (b) An instrument that embodies an obligation on the part of the issuer and meets any of the following conditions:
          •   The issuer may defer indefinitely the settlement of the obligation;
          •   The obligation requires (or permits at the issuer's discretion) settlement by issuance of a fixed number of the issuer's equity shares;
          •   The obligation requires (or permits at the issuer's discretion) settlement by issuance of a variable number of the issuer's equity shares and (ceteris paribus) any change in the value of the obligation is attributable to, comparable to, and in the same direction as, the change in the value of a fixed number of the issuer's equity shares;32 or,
          •   The holder has the option to require that the obligation be settled in equity shares, unless either (i) in the case of a traded instrument, the CBB is content that the bank has demonstrated that the instrument trades more like the debt of the issuer than like its equity, or (ii) in the case of non- traded instruments, the CBB is content that the bank has demonstrated that the instrument should be treated as a debt position. In cases (i) and (ii), the bank may decompose the risks for regulatory purposes, with the consent of the CBB.

          32For certain obligations that require or permit settlement by issuance of a variable number of the issuer's equity shares, the change in the monetary value of the obligation is equal to the change in the fair value of a fixed number of equity shares multiplied by a specified factor. Those obligations meet the conditions of this bullet if both the factor and the referenced number of shares are fixed. For example, an issuer may be required to settle an obligation by issuing shares with a value equal to three times the appreciation in the fair value of 1,000 equity shares. That obligation is considered to be the same as an obligation that requires settlement by issuance of shares equal to the appreciation in the fair value of 3,000 equity shares.

          Amended: April 2011
          Apr 08

        • CA-5.2.24

          Debt obligations and other securities, partnerships, derivatives or other vehicles structured with the intent of conveying the economic substance of equity ownership are considered an equity holding.33 This includes liabilities from which the return is linked to that of equities.34 Conversely, equity investments that are structured with the intent of conveying the economic substance of debt holdings or securitisation exposures would not be considered an equity holding.

          33Equities that are recorded as a loan but arise from a debt/equity swap made as part of the orderly realisation or restructuring of the debt are included in the definition of equity holdings. However, these instruments may not attract a lower capital charge than would apply if the holdings remained in the debt portfolio.

          34Such liabilities are not required to be included where they are directly hedged by an equity holding, such that the net position does not involve material risk.

          Apr 08

        • CA-5.2.25

          The CBB may, on a case by case basis, re-characterise debt holdings as equities for regulatory purposes or otherwise ensure the proper treatment of holdings.

          Apr 08

      • (vii) Definition of Eligible Purchased Receivables

        • CA-5.2.26

          Eligible purchased receivables are divided into retail and corporate receivables as defined below.

          Apr 08

        • Retail Receivables

          • CA-5.2.27

            Purchased retail receivables, provided the purchasing bank complies with the IRB rules for retail exposures, are eligible for the top-down approach as permitted within the existing standards for retail exposures. The bank must also apply the minimum operational requirements as set forth in sections CA-5.6 and CA-5.8.

            Apr 08

        • Corporate Receivables

          • CA-5.2.28

            For purchased corporate receivables, banks are required to assess the default risk of individual obligors as specified in section CA-5.3 (starting with paragraph CA-5.3.2) consistent with the treatment of other corporate exposures.

            Apr 08

    • 2. Foundation and Advanced Approaches

      • CA-5.2.29

        For each of the asset classes covered under the IRB framework, there are three key elements:

        (a) Risk components — estimates of risk parameters provided by banks some of which are CBB's estimates;
        (b) Risk-weight functions — the means by which risk components are transformed into risk-weighted assets and therefore capital requirements; and
        (c) Minimum requirements — the minimum standards that must be met in order for a bank to use the IRB approach for a given asset class.
        Amended: April 2011
        Apr 08

      • CA-5.2.30

        The CBB has decided to allow only the foundation approach for corporate, sovereign and bank asset classes. However, banks are required to adopt the advanced approach for retail asset class. Under the foundation approach, as a general rule, banks provide their own estimates of PD and rely on CBB's estimates for other risk components. Under the advanced approach, banks provide more of their own estimates of PD, LGD and EAD, and their own calculation of M, subject to meeting minimum standards. For both the foundation and advanced approaches, banks must always use the risk-weight functions provided in this chapter for the purpose of deriving capital requirements. The full suite of approaches is described below.

        Apr 08

      • (i) Corporate, Sovereign, and Bank Exposures

        • CA-5.2.31

          For corporate, sovereign and bank exposures only the foundation approach is allowed under which banks must provide their own estimates of PD associated with each of their borrower grades, but must use CBB's estimates for the other relevant risk components. The other risk components are LGD, EAD and M.35

          35 As noted in section CA-5.3.45, CBB may require/allow banks using the foundation approach to calculate M using the definition provided in section CA-5.3.46 to CA-5.3.50.

          Apr 08

        • CA-5.2.32

          There is an exception to this general rule for the five sub-classes of assets identified as SL.

          Apr 08

        • The SL Categories: PF, OF, CF, IPRE, and HVCRE

          • CA-5.2.33

            Banks that do not meet the requirements for the estimation of PD under the corporate foundation approach for their SL assets are required to map their internal risk grades to five supervisory categories, each of which is associated with a specific risk weight. This version is termed the 'supervisory slotting criteria approach'.

            Apr 08

          • CA-5.2.34

            Banks that meet the requirements for the estimation of PD are able to use the foundation approach to corporate exposures to derive risk weights for all classes of SL exposures except HVCRE. Subject to CBB's discretion, on a case by case basis, banks meeting the requirements for HVCRE exposure are able to use a foundation approach that is similar in all respects to the corporate approach, with the exception of a separate risk-weight function as described in paragraph CA-5.3.11.

            Apr 08

      • (ii) Retail Exposures

        • CA-5.2.35

          For retail exposures, banks must provide their own estimates of PD, LGD and EAD. There is no distinction between a foundation and advanced approach for this asset class.

          Apr 08

      • (iii) Equity Exposures

        • CA-5.2.36

          There are two broad approaches to calculate risk-weighted assets for equity exposures not held in the trading book: a market-based approach and a PD/LGD approach. These are set out in full in paragraphs CA-5.5.1 to CA-5.5.23.

          Apr 08

      • (iv) Eligible Purchased Receivables

        • CA-5.2.37

          The treatment potentially straddles two asset classes. For eligible corporate receivables, only the foundation approach is available subject to certain operational requirements being met. For eligible retail receivables, as with the retail asset class, there is no distinction between a foundation and advanced approach.

          Apr 08

    • 3. Adoption of the IRB Approach Across Asset Classes

      • CA-5.2.38

        Once a bank adopts an IRB approach for part of its holdings, it is expected to extend it across the entire banking group. The CBB recognises however, that, for many banks, it may not be practicable for various reasons to implement the IRB approach across all material asset classes and business units at the same time. Furthermore, once on IRB, data limitations may mean that banks can meet the standards for the use of own estimates of LGD and EAD for some but not all of their business units at the same time. CBB will expect banks to define their business units in line with asset classes given in this chapter, however banks can apply to CBB for exemption from this rule.

        Apr 08

      • CA-5.2.39

        As such, CBB allows banks to adopt a phased rollout of the IRB approach across the banking group. The phased rollout includes (i) adoption of IRB across asset classes within the same business unit (or in the case of retail exposures across individual sub-classes); and (ii) adoption of IRB across business units in the same banking group. However, when a bank adopts an IRB approach for an asset class within a particular business unit (or in the case of retail exposures for an individual sub-class), it must apply the IRB approach to all exposures within that asset class (or sub-class) in that unit.

        Apr 08

      • CA-5.2.40

        A bank must produce an implementation plan, specifying to what extent and when it intends to roll out IRB approaches across significant asset classes (or sub-classes in the case of retail) and business units over time. The plan should be exacting, yet realistic, and must be agreed with the CBB. It should be driven by the practicality and feasibility of moving to the more advanced approaches, and not motivated by a desire to adopt an approach that minimises its capital charge. During the roll-out period, CBB will ensure that no capital relief is granted for intra-group transactions which are designed to reduce a banking group's aggregate capital charge by transferring credit risk among entities on the standardised approach, foundation and advanced IRB approaches. This includes, but is not limited to, asset sales or cross guarantees.

        Apr 08

      • CA-5.2.41

        Some exposures in non-significant business units as well as asset classes (or sub-classes in the case of retail) that are immaterial in terms of size and perceived risk profile may be exempt from the requirements in the previous two paragraphs, subject to CBB's approval. Capital requirements for such operations will be determined according to the standardised approach, with the CBB determining whether a bank should hold more capital for such positions.

        Apr 08

      • CA-5.2.42

        Notwithstanding the above, once a bank has adopted the IRB approach for all or part of any of the corporate, bank, sovereign, or retail asset classes, it will be required to adopt the IRB approach for its equity exposures at the same time, subject to materiality. Further, once a bank has adopted the general IRB approach for corporate exposures, it will be required to adopt the IRB approach for the SL sub-classes within the corporate exposure class.

        Apr 08

      • CA-5.2.43

        Banks adopting an IRB approach are expected to continue to employ an IRB approach. A voluntary return to the standardised approach is permitted only in extraordinary circumstances, such as divestiture of a large fraction of the bank's credit- related business, and approval must be obtained from the CBB.

        Apr 08

      • CA-5.2.44

        Given the data limitations associated with SL exposures, a bank may remain on the supervisory slotting criteria approach for one or more of the PF, OF, CF, IPRE or HVCRE sub-classes, and move to the foundation approach for other sub-classes within the corporate asset class.

        Apr 08

    • 4. Transition Arrangements

      • (i) Parallel Calculation

        • CA-5.2.45

          Banks adopting the foundation IRB (advanced IRB for retail class) approach are required to calculate their capital requirement using these approaches, as well as the capital adequacy regulations issued by CBB dated July 2004 for the time period specified in section CA-A.4. The transition period for adoption of IRB will begin from the publication of this Module. Parallel calculation for banks adopting the foundation IRB approach to credit risk will start in the year beginning year-end 2007.

          Apr 08

      • (ii) Corporate, Sovereign, Bank, and Retail Exposures

        • CA-5.2.46

          The transition period starts on the date of implementation of this Module and will last for 3 years from that date. During the transition period, the following minimum requirements can be relaxed:

          (a) For corporate, sovereign, and bank exposures under the foundation approach, paragraph CA-5.8.74, the requirement that, regardless of the data source, banks must use at least five years of data to estimate the PD; and
          (b) For retail exposures, paragraph CA-5.8.77, the requirement that regardless of the data source banks must use at least five years of data to estimate loss characteristics (EAD, and either expected loss (EL) or PD and LGD).
          (c) For corporate, sovereign, bank, and retail exposures, paragraph CA-5.8.56, the requirement that a bank must demonstrate it has been using a rating system that was broadly in line with the minimum requirements articulated in this document for at least three years prior to qualification.
          (d) The applicable aforementioned transitional arrangements also apply to the PD/LGD approach to equity. There are no transitional arrangements for the market-based approach to equity.
          Apr 08

        • CA-5.2.47

          Under these transitional arrangements for IRB, banks must have a minimum of two years of data at the implementation of this Module. This requirement will increase by one year for each of three years of transition.

          Apr 08

        • CA-5.2.48

          Owing to the potential for very long-run cycles in house prices which short-term data may not adequately capture, during this transition period, LGDs for retail exposures secured by residential properties cannot be set below 10% for any sub-segment of exposures to which the formula in paragraph CA-5.4.3 is applied.36 During the transition period the CBB will review the potential need for continuation of this floor.

          36 The 10% LGD floor shall not apply, however, to sub-segments that are subject to/benefit from sovereign guarantees. Further, the existence of the floor does not imply any waiver of the requirements of LGD estimation as laid out in the minimum requirements starting with section CA-5.8.79.

          Apr 08

      • (iii) Equity Exposures

        • CA-5.2.49

          For a maximum of ten years, CBB may, on a case by case basis, exempt from the IRB treatment particular equity investments held at the time of the publication of this Module. This exemption period will begin from the publication of this Module. The exempted position is measured as the number of shares as of that date and any additional arising directly as a result of owning those holdings, as long as they do not increase the proportional share of ownership in a portfolio company.

          Apr 08

        • CA-5.2.50

          If an acquisition increases the proportional share of ownership in a specific holding (e.g. due to a change of ownership initiated by the investing company subsequent to the publication of this Module) the exceeding part of the holding is not subject to the exemption. Nor will the exemption apply to holdings that were originally subject to the exemption, but have been sold and then bought back.

          Apr 08

        • CA-5.2.51

          Equity holdings covered by these transitional provisions will be subject to the capital requirements of the standardised approach.

          Apr 08