CA-5.3 CA-5.3 Equity Position Risk
Introduction
CA-5.3.1
The minimum capital requirement for equities is expressed in terms of two separately calculated charges, one relating to the "specific risk" of holding a long position in an individual equity, and the other to the "general
market risk " of holding a long position in the market as a whole. Where the bank has invested in shares/units of equity funds on Mudaraba financing and the bank has direct exposures in the equities which are traded in a recognised stock exchange, the shares/units are considered to be subject to equity risk. The equity position would be considered to be the net asset value as at the reporting date.January 2015Specific Risk Calculation
CA-5.3.2
Specific risk is defined as the
Islamic bank licensee's gross equity positions (i.e. the sum of all equity positions) and is calculated for each country or equity market. For each national market in which theIslamic bank licensee holds equities, it must sum the market values of its individual net positions irrespective of whether they are long or short positions, to produce the overall gross equity position for that market.January 2015CA-5.3.3
The capital charge for specific risk is 8%.
January 2015CA-5.3.4
[This Paragraph was deleted in January 2012]
January 2015General Risk Calculation
CA-5.3.5
The general
market risk is calculated by first determining the difference between the sum of the long positions and the sum of the short positions (i.e. the overall net position) in each national equity market. In other words, to calculate the generalmarket risk , theIslamic bank licensee must sum the market value of its individual net positions for each national market, taking into account whether the positions are long or short.January 2015CA-5.3.6
The general market equity risk measure is 8% of the overall net position in each national market.
January 2015
