Summary of Capital Requirement at Various Stages of the Contract
CA-3.4.38
The following tables set out the applicable period of the contract that attracts capital charges where the
Islamic bank licensee is the seller.(a) Exposure to customer(i) Istisna'a with Parallel Istisna'a
Applicable Stage of the Contract Credit RW Market Risk Capital Charge Unbilled WIP inventory
Amount receivable after contract billingsBased on ultimate buyer's rating or 100% RW for unrated buyer.
No netting of Istisna'a exposures against Parallel Istisna'a exposures.
(See Paragraphs CA-3.4.13 to CA-3.4.19)
(See Section CA-4.2)Nil provided that there is no provision in the Parallel Istisna'a contract that allows the seller to increase or vary the selling price. See Paragraphs CA-3.4.20 and CA-3.2.21.
If the seller is allowed to vary the selling price of the asset, then under themarket risk treatment 15% capital charge on net long or short position plus 3% capital charge on gross positions (see CA-5.2.2).Upon full settlement of the purchased price by an Istisna'a buyer. NA NA (ii) Istisna'a without Parallel Istisna'a
Applicable Stage of the Contract Credit RW Market Risk Capital Charge Unbilled WIP inventory Based on ultimate buyer's rating or 100% RW for unrated buyer. 1.6% capital charge (equivalent to 20% RW) on work in progress inventory.
See relevant Paragraphs under CA-3.4.22 to CA-3.4.23Progress billing to customer. Based on ultimate buyer's rating or 100% RW for unrated buyer.
(See Paragraphs CA-3.4.14 to CA-3.4.22) (See Section CA-4.2)NA Upon full settlement of the purchased price by an Istisna'a buyer. NA NA (b) Exposure to asset
Istisna'a with Parallel Istisna'a (for project finance)
Applicable Stage of the Contract Credit RW Market Risk Capital Charge Unbilled WIP inventory Based on buyer's ECAI rating if available or supervisory slotting criteria that ranges from 70% to 250% RW.
No netting of Istisna'a exposures against Parallel Istisna'a exposures.
(See Sections CA-4.2 and CA-4.3)NA Amount receivable after contract billings NA Upon full settlement of the purchased price by an Istisna'a buyer. NA NA January 2015CA-3.4.39
The following tables set out the applicable period of the contract that attracts capital charges where the
Islamic bank licensee is acting as buyer.(a) Exposure to customer(i) Istisna'a with Parallel Istisna'a
Applicable Stage of the Contract Credit RW Market Risk Capital Charge Unbilled WIP inventory Based on ultimate buyer's rating or 100% RW for unrated buyer.
No netting of Istisna'a exposures against Parallel Istisna'a exposures.
(See Paragraphs CA-3.4.13 to CA-3.4.19)
(See Section CA-4.2)Nil provided that there is no provision in the Parallel Istisna'a contract that allows the seller to increase or vary the selling price. See Paragraph CA-3.4.20.
If the seller is allowed to vary the selling price of the asset, then under themarket risk treatment 15% capital charge on net long or short position plus 3% capital charge on gross positions.Amount receivable after contract billings Upon full settlement of the purchased price by an Istisna'a buyer. NA NA (ii) Istisna'a without Parallel Istisna'a
Applicable Stage of the Contract Credit RW Market Risk Capital Charge Amounts of progress payments to suppliers for WIP inventory. None (no ultimate Istisna'a customer)
Seecredit risk under Section CA-3.415% for WIP inventory See Market risk under Section CA-3.4.20 onward(b) Exposure to asset
Istisna'a with Parallel Istisna'a (for project finance)
Applicable Stage of the Contract Credit RW Market Risk Capital Charge Unbilled WIP inventory Based on buyer's ECAI rating if available or supervisory slotting criteria that ranges from 70% to 250% RW.
No netting of Istisna'a exposures against Parallel Istisna'a exposures.
(See Sections CA-4.2 and CA-4.3)NA Amount receivable after contract billings NA Upon full settlement of the purchased price by an Istisna'a buyer. NA NA January 2015
