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CA-1.1.12

For the purpose of this Module the consolidated CAR is calculated by applying the Total Capital (as defined in Paragraph CA-1.1.2) to the numerator and risk-weighted assets (RWAs) as defined in Paragraph CA-1.1.3) to the denominator as shown below.

                                            Total Capital                                            
{Self-financed RWAs (Credit + Market Risks) + Operational Risks

Plus

α [RWAs funded by UPSIAsa (Credit + Market Risks) -
PER and IRR of UPSIAs]}

(a) Where the funds are commingled, the RWA funded by UPSIA are calculated based on their pro-rata share of the relevant assets.
(b) α refers to the proportion assets funded by UPSIA which, as determined by the CBB, is 30%; and
(c) The UPSIAs' share of PER and by IRR is deducted from the total RWAs funded by the UPSIAs. The PER has the effect of reducing the displaced commercial risk and the IRR has the effect of reducing any future losses on the investment financed by the PSIA.

This formula is applicable as the Islamic bank licensees may smooth income to the UPSIAs as a mechanism to minimise withdrawal risk.
January 2015