In order for minority interest arising from the issue of common shares by a fully consolidated subsidiary of the Islamic bank licensee to be recognised in CET1 for the consolidated CAR calculation, it must meet the following conditions:
(a) The instrument giving rise to the minority interest would, if issued by the Islamic bank licensee, meet all of the criteria for classification as common shares for regulatory capital purposes;
(b) The subsidiary that issued the instrument is itself a bank1,2; and
(c) The subsidiary meets the limits outlined in Paragraph CA-2.3.2.
1 For the purposes of this paragraph, any institution that is subject to the same minimum prudential standards and level of supervision as a bank may be considered to be a bank.
2 Minority interest in a subsidiary that is a bank is strictly excluded from the parent bank's common equity if the parent bank or affiliate has entered into any arrangements to fund directly or indirectly minority investment in the subsidiary whether through an SPV or through another vehicle or arrangement. The treatment outlined above, thus, is strictly available where all minority investments in the bank subsidiary solely represent genuine third party common equity contributions to the subsidiary.
January 2015
