F. RWA for Equity Investments in Funds
C 52/2017 STA Effective from 1/12/202224.Banks must calculate the risk weight to be applied to their equity investments in any fund as the product of the fund’s average risk weight and the fund’s leverage:
Risk Weight = Avg RWfund × Leverage
where Avg RWfund = the average risk-weight for the fund’s assets as calculated under this Standard, and
Leverage = the fund’s leverage as measured by the fund’s ratio of assets to equity as calculated under this Standard.
25.The risk weight for a bank’s equity investment in any fund is subject to a cap of 1250 percent. If the calculation described in the paragraph above produces a result in excess of 1250 percent, the bank should use the maximum risk weight of 1250 percent instead.
26.Banks should compute the RWA for their investments in funds by multiplying the amount of the equity investment in a given fund by the risk weight calculated as described in this Standard, based on Avg RWfund and the leverage of the fund determined according to this Standard.