CA-3.10.15

This type of Wakalah investment exposes the Islamic bank licensee to capital impairment risk. Due to this downside risk, the RW is measured according to equity position in the banking book approach. The RW must be applied to the exposures net of specific provision, if any.

CA-3.10.16

As explained in Sections CA-3.6 and 3.7, there are two possible methods used to calculate the equity exposures, that is:

CA-3.10.17

The RW under the simple risk-weighting method (a) entails a RW of 300–400%. Under the slotting method (b), an Islamic bank licensee must map its RW into four supervisory categories as described in Appendix CA-5 (specialised financing) where the RWs of each category are as follows:

The above RWs under the slotting method for specialised financing include an additional fixed factor of 20% RW to cater for potential decline in the Wakalah net asset value.

For further explanation, also see Paragraphs CA-4.8.7 to 4.8.11.