PCD-2.3.1

Investments in commercial entities include holding of equities of commercial entities acquired through underwriting activities which have been held for more than 90 days².

² Within the period of 90 days, CBB approved underwritten amounts are subject to treatment outlined in Section CM-4.5. See also Chapter CA-5 if such positions are to be included in the trading book.

PCD-2.3.2

"Qualifying holdings" in commercial entities which exceed certain materiality levels outlined in CM-4.9 must be deducted from the bank's capital for regulatory capital purposes. If the investments exceed a materiality level of 15% of the bank's capital on an individual basis, the concerned bank is required to deduct the excess amount from its capital. If the aggregate amount of qualifying holdings exceeds a threshold of 60% of the bank's capital, then such excess amount is also to be deducted from the bank's capital. The application of the materiality levels will be undertaken in the order of deduction of amount in excess of 15% of bank's capital followed by 60% of capital. An illustrative example is provided in Appendix PCD-1.

PCD-2.3.3

Investments in commercial entities below the level of a qualifying holding will be risk-weighted under the applicable risk weighting rules (see chapter CA-5 for trading book and chapter CA-4 for banking book). The risk-weighting treatment will follow the accounting method in the concerned bank's audited financial statements. The effect of banks' existing significant qualifying holdings will be reviewed by the CBB. The CBB will then discuss any possible transitional arrangements with concerned banks.