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  • Summary of Capital Requirements for Mudarabah Categories

    • CA-3.7.24

      The Mudarabah categories that attract capital charges of Paragraphs CA-3.7.11 and CA-3.7.12 are:

      Mudarabah Category Credit RW Market Risk Capital Charge
      Private commercial enterprise to undertake trading activities in the foreign exchange, share and/or commodity Not applicable Depends on the underlying asset as set out in the applicable market risk section
      Private commercial enterprise to undertake business venture other than trading activities in the foreign exchange, share and/or commodity
      (a) Simple risk-weight method: 400% RW* of the contributed amount to the business venture less any specific provisions or:
      (b) Slotting method: Between 90% and 270% RW of the contributed amount to the business venture based on the four categories
      		 Not applicable

      * 300% RW may be applied if the funds are subject to withdrawal by the investor at short notice.

      January 2015

    • CA-3.7.25

      The applicable stages in a Mudarabah contract in project finance that attract capital charges of Paragraph CA-3.7.13 are:

      Applicable Stages in a Contract Credit RW Market Risk Capital Charge
      Prior to certification, where funds are already advanced by the bank to the Mudarib Risk weight is based on the rating of either the ultimate customer or the Mudarib (see Paragraph CA-3.7.13). Otherwise, 400% RW is applied to an unrated Mudarib. Not applicable
      After certification, where the amount is receivable by the bank from the Mudarib in respect of progress payment to the Mudarib from the ultimate customer If a "repayment account" or similar mitigation structure is used, RW is based on the credit standing of the ultimate customer on the amounts receivable by the bank from the Mudarib (or 100% RW for unrated customer). Not applicable
      January 2015