7.2.1 MBA Based Approach
Effective from Jun 12 2006 - Jun 11 2006
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| Under the market-based approach, institutions are permitted to calculate the minimum capital requirements for their banking book equity holdings using one or both of two separate and distinct methods: a simple risk weight method or an internal models method. | |
| The method used should be consistent with the amount and complexity of the institution’s equity holdings and commensurate with the overall size and sophistication of the institution. | |
| Supervisors may require the use of either method based on the individual circumstances of an institution. | |
| (Refer para 343, International Convergence of Capital Measurement and Capital Standards – June 2006) | |
| • | Under the simple risk weight method, a 300% risk weight to be applied to publically traded, and 400% for all others. |
| • | If an internal model is used, minimum quantitative and qualitative requirements would have to be met on an ongoing basis, including a minimum capital charge be no less than the capital charge that would be calculated under the simple approach at a risk weight of 200% for publically traded, and 300% for other equities. |