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CA-2.1.8

T2 capital consists of the sum of the following items

(a) Instruments issued by the Islamic bank licensee that meet the criteria for inclusion in T2 capital outlined in Paragraph CA-2.1.10;
(b) Stock surplus (share premium) resulting from the issue of instruments included in T2 capital;
(c) Instruments issued by consolidated banking subsidiaries of the Islamic bank licensee and held by third parties that meet the criteria for inclusion in T2 capital and are not included in T1. See Section CA-2.3 for the relevant criteria;
(d) General provisions held against future, presently unidentified losses on financing which are freely available to meet losses which subsequently materialise and qualify for inclusion within T2. Such general provisions which are eligible for inclusion in T2 are limited to a maximum of 1.25 percentage points of credit risk-weighted risk assets. Provisions ascribed to identified deterioration of particular financing assets or known liabilities, whether individual or grouped, must be excluded from T2 Capital;
(e) Regulatory adjustments applied in the calculation of T2 Capital (see CA-2.4); and
(f) Asset revaluation reserves which arise from the revaluation of fixed assets from time to time in line with the change in market values, and are reflected on the face of the balance sheet as a revaluation reserve. Similarly, gains may also arise from revaluation of Investment Properties (real estate). These reserves (including the net gains on investment properties) may be included in T2 capital, with the concurrence of the external auditor, provided that the assets are prudently valued, fully reflecting the possibility of price fluctuation and forced sale.
January 2015