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Article (3): Capital Components

C 52/2017 Effective from 23/2/2017
  1. CET1 capital comprises the sum of the following items:
     
    1. Common shares issued by a bank which are eligible for inclusion in CET1;
       
    2. Share premium resulting from the issue of instruments included in CET1;
       
    3. Retained earnings;
       
    4. Legal reserves;
       
    5. Statutory reserves;
       
    6. Accumulated other comprehensive income and other disclosed reserves;
       
    7. Common shares issued by consolidated subsidiaries of a bank and held by third parties, also referred to as minority interest, which are eligible for inclusion in CET1;
       
    8. Regulatory adjustments applied in the calculation of CET1.
       
  2. AT1 capital comprises the sum of the following items:
     
    1. Instruments issued by a bank which are eligible for inclusion in AT1 and are not included in CET1;
       
    2. Stock surplus, or share premium, resulting from the issue of instruments included in AT1;
       
    3. Instruments issued by consolidated subsidiaries of the bank and held by third parties which are eligible for inclusion in AT1 and are not included in CET1;
       
    4. Regulatory adjustments applied in the calculation of AT1.
       
  3. Tier 2 capital comprises the sum of the following items:
     
    1. Banks using the standardized approach for credit risk: general provisions/general loan loss reserves up to a maximum of 1.25 % of credit RWA;
       
    2. Perpetual equity instruments, not included in Tier 1 capital;
       
    3. Share premium resulting from the issue of instruments included in Tier 2 capital;
       
    4. Instruments which are eligible for inclusion of Tier 2;
       
    5. Perpetual instruments issued by consolidated subsidiaries, not included in Tier 1 capital;
       
    6. Regulatory adjustments applied in the calculation of Tier 2.
       
  4. Profit-sharing investment accounts must not be classified as part of an Islamic bank’s regulatory capital as referred to in Article 2 of these Regulations.
     
  5. Investment risk reserves and a portion of the profit equalization reserve (PER), if any, belong to the equity of investment account holders, and thus must not be used in the calculation of an Islamic bank’s regulatory capital. As the purpose of a PER is to smooth the profit payouts and not to cover losses, any portion of a PER that is part of the Islamic bank’s reserves must not be treated as regulatory capital as referred to in Article 2 of these Regulations.