CA-9.1.4

As mentioned in Subparagraph CA-3.6.11, an Islamic bank licensee can enter into a private commercial enterprise to undertake a business venture (which can include real estate). There are two possible methods used to calculate equity exposures in this type of investment. According to the simple risk-weight method, the RW must be applied to the exposures (net of specific provisions) based on the treatment of equity exposures in the banking book. The applicable RW for such exposures must entail a 400% RW for investments in shares that are not publicly traded less any specific provisions for impairment. Alternatively, a 300% RW is applicable for investments in shares that are publicly traded less any specific provisions for impairment. If there is a third-party guarantee to make good impairment losses, the RW of the guarantor may be substituted for that of the assets for the amount of any such guarantee where the risk weight of the guarantor is lower, subject to the conditions for guarantees in Section CA-4.7 being fulfilled. In order to use the alternative slotting method for calculation of RWs, an Islamic bank licensee must seek the CBB's prior written approval and map its RWs into four supervisory categories as set out in Appendix CA-6.