Risk-weighted Assets
CA-A.3.6
Total risk-weighted assets are determined by:
(i) Multiplying the capital requirements for market risk and operational risk by 12.5; and(ii) Adding the resulting figures to the sum of risk-weighted assets for credit risk.Amended: January 2011
Apr 08CA-A.3.7
Islamic banks are not contractually obliged to make good losses arising from Islamic financing assets funded by the investment accounts, unless these losses arise from the negligence on the part of the Islamic bank as manager (Mudarib) or as agent (Wakeel). However to be prudent, the CBB requires Islamic banks to provide regulatory capital to cover minimum requirement arising from 30% of the risk weighted assets and contingencies financed by the unrestricted investment accounts. Therefore, for the purpose of calculating its Capital Adequacy Ratio (CAR), the risk-weighted assets of an Islamic bank consist of the sum of the risk-weighted assets financed by the Islamic bank's own capital and liabilities, plus 30% of the risk-weighted assets financed by the Islamic bank's unrestricted PSIAs.
Amended: January 2011
Apr 08CA-A.3.8
In measuring credit risk for the purpose of
capital adequacy , banks must apply the standardised approach through which claims of different categories of counterparties are assigned risk weights (RWs) according to broad categories of relative riskiness.Apr 08CA-A.3.9
For the measurement of their operational risks, banks have a choice, subject to the written approval of the CBB, between two broad methodologies:
(a) One alternative is to measure the risks using a basic indicator approach, applying the measurement framework described in Chapter CA-6 of this Module; and(b) The second methodology (i.e. the standardised approach) is set out in detail in Chapter CA-6 including the procedure for obtaining the CBB's approval. This methodology is subject to the fulfillment of certain conditions. The use of this methodology is, therefore, conditional upon the explicit approval of the CBB.Amended: January 2011
Apr 08CA-A.3.10
In measuring market risk for the purpose of
capital adequacy , banks must apply the approach set out in relevant sections.Apr 08CA-A.3.11
If an Islamic bank wants to adopt an advanced approach (IRB for credit risk and/or IMA for market risk), it will need to apply to the CBB for prior approval.
Apr 08
