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CA-3.5.22

The following tables set out the applicable stage of the contract that attracts capital charges:

Operating Ijara

Applicable Stage of the Contract Credit RW Market Risk Capital Charge
Asset available for lease (prior to signing a lease contract) Binding PL*

Asset acquisition cost less (a) market value of asset fulfilling function of collateral (net of any haircuts), and (b) any HJ multiply by the customer's rating or 100% RW for unrated customer
Non-binding PL 15% capital charge until lessee takes possession
Asset available for lease and the lease rental payments are due from the lessee Total estimated value of lease receivables for the whole duration of leasing contract is risk-weighted according to the lessee's rating.

100% RW for an unrated lessee less residual value of the leased asset
The residual value is risk-weighted at 100%
Maturity of contract term and the leased asset is returned to the bank Not applicable 15% capital charge of the carrying value of the asset

* This credit RW is applicable only when the bank has recourse to any HJ paid by the customer, and (depending on the legal situation) may have a right to recoup from the customer any loss on leasing or disposing of the asset to a third party, after taking account of the HJ. If the bank has no such right, the cost of the asset to the bank constitutes a market risk (as in the case of a non-binding PL), but this market risk exposure is reduced by the amount of any HJ that the bank has the right to retain.

January 2015