IBANK 6.6.4 Calculating specific Risk Capital Charge

(1) The capital charge for specific risk arising from an on-balance-sheet or off-balance-sheet profit-rate position held in an Islamic banking business firm's trading book is calculated by multiplying the market value of the debt security by the applicable charge set out in column 5 of table 6.6.4 for the category and residual maturity of the instrument.
(2) The firm can only offset matched long and short positions (including positions in Shari'a-compliant hedging instruments) in identical instruments with exactly the same issuer, profit rate, currency and maturity.

Table 6.6.4 Specific risk capital charges

column 1
item
column 2
category
column 3
external credit rating
column 4
residual maturity
column 5
specific risk capital charge %
1 government AAA to AA-   0.00
A+ to BBB- 6 months or less

more than 6 months and up to and including 24 months

more than 24 months
0.25

1.00

1.60
BB+ to B- or unrated   8.00
Below B-   12.00
2 qualifying   6 months or less

more than 6 months and up to and including 24 months

more than 24 months
0.25

1.00

1.60
3 other BB+ to BB- or unrated

Below BB-
  8.00

12.00
(3) In column 2 of table 6.6.4:

government, as a category, includes all forms of government paper such as bonds, treasury bills and other short-term instruments.

Note Financial instruments issued by the State of Qatar (whether denominated in Qatari riyals or not), or by other member states of the GCC, are risk-weighted at zero per cent.

qualifying, as a category, includes:
(a) securities issued by public sector enterprises and multilateral development banks;

Note For a list of multilateral development banks that qualify for 0% risk weight, and examples of other multilateral development banks that do not, see the note following table 4.4.7A.
(b) instruments rated investment grade by at least 2 ECRAs;
(c) instruments rated investment grade by 1 ECRA and 1 other credit rating agency that is not an ECRA; and
(d) unrated instruments, but only if:
(i) the firm has no reason to suspect that the particular instrument would have a rating less than investment grade if it were rated; and
(ii) the issuer of the instrument is rated investment grade and is regulated in its home jurisdiction in a way comparable to deposit-takers in the QFC.

Guidance

In deciding whether an issuer is regulated in a comparable way, the firm must look, in particular, at the home jurisdiction's risk-based capital requirements and consolidated supervision.

other, as a category, includes:
(a) instruments issued or fully guaranteed by the central government or central bank of a state that is a member of the OECD;
(b) instruments fully collateralised by instruments described in paragraph (a); and
(c) instruments issued or fully guaranteed by the central government or central bank of a state that is not a member of the OECD, but only if:
(i) the instruments have a residual maturity of 1 year or less;
(ii) the instruments are denominated in the local currency of the issuer; and
(iii) the firm's holdings in such instruments are funded by liabilities in the same currency.
(4) In column 3 of table 6.6.4, external credit rating means a long-term rating issued by an ECRA for the purpose of risk-weighting claims on rated counterparties and exposures.
Amended from QFCRA RM/2018-2 (as from 1st May 2018).