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Appendix PCD-1 Investments in Commercial Entities

Bank "x" with eligible capital of 1,000,000 before deductions has made investment in seven commercial entities listed below:

Investee Amount %age of bank's capital
a 100,000 10%
b 120,000 12%
c 150,000 15%
d 160,000 16%
e 170,000 17%
f 200,000 20%
g 250,000 25%
Total 1,150,000 115%

The amount to be deducted from capital in respect of these investments will be based on the following calculation:

15% threshold (Individual basis)

Sr # Amount 15% of Bank's capital Excess over 15% of Bank's capital
d 160,000 150,000 10,000
e 170,000 150,000 20,000
f 200,000 150,000 50,000
g 250,000 150,000 100,000
Total     180,000

Capital deduction on account of 15% threshold on individual basis is 180,000 (A).

60% Threshold (Aggregate basis)

Aggregate of investments after 15% deduction:

c 150,000
d 150,000
e 150,000
f 150,000
g 150,000
Total 750,000 (B)

60% of Bank's capital = 600,000
Aggregate (B) = 750,000
Deduction = 150,000

So the capital deduction based on the 60% threshold on aggregate basis is 150,000 (C).

Total deduction based on investments in commercial entities is 330,000 (A+C).

Net eligible capital after deductions is 670,000 (1,000,000 - 330,000).

Remaining amount of investments 820,000 (1,150,000-330,000) will be risk weighted under the applicable risk weighting rules.