CA-4.1.2
Broadly, the assignment of Risk Weights (RWs) takes into consideration the following:
(a) The credit risk rating of an obligor or other counterparty, or a security, based on external credit assessment institutions (ECAI) ratings22. In determining the risk weights in the standardised approach, Islamic bank licensees must use assessments by only those external credit assessment institutions which are recognised as eligible for capital purposes by CBB in accordance with the criteria defined in Section CA-4.6;
(b) Credit risk mitigation techniques adopted by the Islamic bank licensees ;
(c) Types of the underlying assets that are sold and collateralised or leased by the Islamic bank licensees ; and
(d) The amount of specific provisions made for the overdue portion of accounts receivable or lease payments receivable.
22 The notations follow the methodology used by one institution, Standard & Poor's. The use of Standard & Poor's credit ratings is an example only; those of some other external credit assessment institutions could equally well be used. The ratings used throughout this document, therefore, do not express any preferences or determinations on external assessment institutions by the CBB.
January 2015