25.Claims secured by residential property are defined as loans secured by residential property that is either self-occupied or rented out. The property must be fully mortgaged in favor of the bank.

26.The Loan-to-Value (LTV) ratio is the outstanding loan exposure divided by the value of the property. The value of the property will be maintained at the value at origination unless the Central Bank requires banks to revise the property value downward. The value must be adjusted if an extraordinary, idiosyncratic event occurs resulting in a permanent reduction of the property value. Such adjustment must be notified to the Central Bank. If the value has been adjusted downwards, a subsequent upwards adjustment can be made but not to a higher value than the value at origination.

27.A 35% risk weighting shall apply to eligible residential claims if the LTV ratio is less than 85% and the exposure is less than AED 10 million. When the loan amount exceeds AED 10 million and the LTV is below 85%, the loan amount up to AED 10 million will receive 35% risk weight and the remaining amount above AED 10 million receives 100% risk weight.

28.A risk weight of 75% may be applied by banks that do not hold information regarding LTVs for individual exposures

29.For residential exposures that meet the criteria for regulatory retail claims and have an LTV greater than 85%, the 75% risk weight must be applied to the whole loan, i.e. the loan should not be split.

30.The risk-weights in this asset class may be applied to a limit of four individual properties made to a single individual customer that are owner- occupied or rented out by a retail borrower. Any additional exposure to a customer with loans for four individual properties shall be classified as a claim on a commercial property and risk weighted with 100%.