CA-2.3.1

In order for minority interest arising from the issue of common shares by a fully consolidated subsidiary of the conventional bank licensee to be recognised in CET1 for the consolidated CAR calculation, it must meet the following conditions:

¹ For the purposes of this paragraph, any institution that is subject to the same minimum prudential standards and level of supervision as a bank may be considered to be a bank.

² Minority interest in a subsidiary that is a bank is strictly excluded from the parent bank's common equity if the parent bank or affiliate has entered into any arrangements to fund directly or indirectly minority investment in the subsidiary whether through an SPV or through another vehicle or arrangement. The treatment outlined above, thus, is strictly available where all minority investments in the bank subsidiary solely represent genuine third party common equity contributions to the subsidiary.

CA-2.3.2

The amount of minority interest meeting the criteria above that will be recognised in consolidated CET1 will be calculated as follows:

CA-2.3.2A

Appendix CA-1 outlines an example of the effect of an allocation of minority interest between the parent bank and minority shareholders in the fully consolidated subsidiary.

CA-2.3.3

AT1 capital instruments issued by a fully consolidated banking subsidiary of the conventional bank licensee to third party investors (including amounts under Paragraph CA-2.3.2) may receive recognition in T1 capital only if the instruments would, if issued by the conventional bank licensee, meet all of the criteria for classification as T1. The amount of this AT1 that will be recognised in consolidated AT1 will exclude amounts recognised in consolidated CET1 under Paragraph CA-2.3.2 and will be calculated as follows:

CA-2.3.4

T2 instruments issued by a fully consolidated banking subsidiary of the conventional bank licensee to third party investors (including amounts under Paragraphs CA-2.3.2 and CA-2.3.3) may receive recognition in consolidated Total Capital only if the instruments would, if issued by the conventional bank licensee, meet all of the criteria for classification as T2. The amount of this T2 that will be recognised in the parent bank's T2 will exclude amounts recognised in CET1 under Paragraph CA-2.3.2 and amounts recognised in AT1 under Paragraph CA-2.3.3 and will be calculated as follows:

CA-2.3.5

Where capital has been issued to third parties out of a special purpose vehicle (SPV), none of this capital can be included in consolidated CET1. However, such capital can be included in consolidated AT1 or T2 and treated as if the conventional bank licensee itself had issued the capital directly to the third parties only if it meets all the relevant entry criteria and the only asset of the SPV is its investment in the capital of the conventional bank licensee in a form that meets or exceeds all the relevant entry criteria³ (as required by CA-2.1.6(r) for AT1 and CA-2.1.10(i) for T2). In cases where the capital has been issued to third parties through an SPV via a fully consolidated subsidiary of the conventional bank licensee, such capital may, subject to the requirements of this paragraph, be treated as if the subsidiary itself had issued it directly to the third parties and may be included in the conventional bank licensee's consolidated AT1 or T2 in accordance with the treatment outlined in Paragraphs CA-2.3.3 and CA-2.3.4.

³ Assets that relate to the operation of the SPV may be excluded from this assessment if they are de minimis.