70.Instead of a full deduction, the following items may each receive limited recognition when calculating CET1, with recognition capped at 10% of the bank’s common equity (after applying all other regulatory deductions in full, apart from the deductions outlined in this Standard (paragraph 69 to 71)):

1. i.Significant investments in the common shares of unconsolidated financial institutions (banking, securities and other financial entities) and insurance entities as referred to in Section 3.10 (paragraph 66). Any amount exceeding this 10% threshold is deducted from CET1 capital;
2. ii.DTAs that rely on future profitability and arise from temporary differences. Any amount exceeding this 10% threshold is deducted from CET1 capital

The amount below the 10% threshold of the above two items are aggregated and must not exceed 15% of the Common Equity Tier 1 capital (after application of all other regulatory adjustments and the amount of significant investments in the common shares of unconsolidated financial institutions and deferred tax assets in full). The calculation for threshold deduction is explained with an example in Appendix 5 in Guidance for Capital Adequacy of Banks in the UAE.

71.The amount of the two items (outlined in paragraph 69) that are not deducted in the calculation of CET1 will be risk weighted at 250%.

Former deductions from capital

72.The following items, which under former Central Bank’s Regulations were deducted 50% from Tier 1 and 50% from Tier 2 (or had the option of being deducted or risk weighted), will receive a 1250% risk weight:

1. i.Certain securitization exposures;
2. ii.Non-payment/delivery on non-DvP and non-PvP transactions; and
3. iii.Significant investments in commercial entities