Back Custom print Link Text Only Rich Text Print

  • Summary of Capital Requirement at Various Stages of the Contract

    • CA-3.5.22

      The following tables set out the applicable stage of the contract that attracts capital charges:

      Operating Ijara

      Applicable Stage of the Contract Credit RW Market Risk Capital Charge
      Asset available for lease (prior to signing a lease contract) Binding PL*

      Asset acquisition cost less (a) market value of asset fulfilling function of collateral (net of any haircuts), and (b) any HJ multiply by the customer's rating or 100% RW for unrated customer      		 Non-binding PL 15% capital charge until lessee takes possession
      Asset available for lease and the lease rental payments are due from the lessee Total estimated value of lease receivables for the whole duration of leasing contract is risk-weighted according to the lessee's rating.

      100% RW for an unrated lessee less residual value of the leased asset      		 The residual value is risk-weighted at 100%
      Maturity of contract term and the leased asset is returned to the bank Not applicable 15% capital charge of the carrying value of the asset

      * This credit RW is applicable only when the bank has recourse to any HJ paid by the customer, and (depending on the legal situation) may have a right to recoup from the customer any loss on leasing or disposing of the asset to a third party, after taking account of the HJ. If the bank has no such right, the cost of the asset to the bank constitutes a market risk (as in the case of a non-binding PL), but this market risk exposure is reduced by the amount of any HJ that the bank has the right to retain.

      January 2015

    • CA-3.5.23

      IMB

      Applicable Stage of the Contract Credit RW Market Risk Capital Charge
      Asset available for lease (prior to signing a lease contract) Binding PL*

      Asset acquisition cost less (a) market value of asset fulfilling function of collateral (net of any haircuts), and (b) any HJ multiplied by customer's rating or 100% RW for unrated customer      		 Non-binding PL 15% capital charge until lessee takes possession
      When the lessee has the right to use the asset and the lease rental payments are due from the lessee Total estimated value of lease receivables for the whole duration of leasing contract is risk-weighted according to the lessee's credit rating. 100% RW for an unrated lessee less residual value of the leased asset Not applicable
      Maturity of contract term and the leased asset is sold and theasset ownership is transferred to the lessee Not applicable Not applicable

      * This credit RW is applicable only when the bank has recourse to any HJ paid by the customer. In the case of HJ (depending on the legal situation), the bank may have a right to recoup from the customer any loss on leasing or disposing of the asset to a third party, after taking account of the HJ, while any excess HJ must be refunded. If the bank has no such right, the cost of the asset to the bank constitutes a market risk (as in the case of a non-binding PL), but this market risk exposure is reduced by the amount of any HJ that the bank has the right to retain.

      January 2015