1.All banks operating in the UAE must use the Standardised Approach to calculate their capital requirements for credit risk with effect from 31st March 2021.

2.The requirements of the standardised approach for risk weighting of banking book exposures set out in the below sections with regards to exposures related to securitization are risk weighted based on the Standards on Capital for Securitisation Exposures.

3.Exposures related to banks’ equity investments in funds are risk weighted based on the requirements of the below Standard on Equity Investments in Funds. The credit equivalent amount of over-the-counter (OTC) derivatives that expose a bank to counterparty credit risk is calculated under the requirements set forth in the below Standard on Counterparty Credit Risk Capital. Risk-weighted asset amounts for Credit Valuation Adjustment (CVA) risk are calculated based on the provisions set out below in the Standard, Credit Valuation Adjustment

4.In determining the risk weights in the standardised approach, banks must use assessments by external credit assessment institutions recognised as eligible for capital purposes by the Central Bank in accordance with the criteria defined in the Guidance on Recognition of External Credit Assessment Institutions (ECAI). Exposures must be risk-weighted net of specific provisions.

5.The Standards follow the calibration developed by the Basel Committee, which includes a maximum risk weight of 1250%, calibrated on a total capital adequacy requirement of 8%. The UAE instituted a higher minimum capital requirement of 10.5% (excluding capital buffers), applicable to all licensed banks. Consequently, the maximum capital charge for a single exposure will be the lesser of the value of the exposure after applying valid credit risk mitigation, netting and haircuts, and the capital resulting from applying a risk weight of 952% (reciprocal of 10.5%) to this exposure