1 2 3 4 Question: Based on IFSB\'s supervisory discretion formula for profit sha
ID: 2538447 • Letter: 1
Question
1 2 3 4 Question: Based on IFSB's supervisory discretion formula for profit sharing investment account (PSIA), Basel Ill requirements and details below, illustrate whether Bank X meets the minimum capital requirement (8% of RWA) a. if alpha is 0.3 b. If PSIA effectively becomes a pure investment carrying the full risk of credit loss c. If alpha is 0.3 but without profit equalization reserve S million) 3,000 750 2,000 2,000 1000 7 Paid-up share capital 8 Retained earnings 9 Tier 2 compliant sukuk murabahah 10 Short-term subordinated debt 11 Credit risk weighted assets 12 Credit risk absorbed by restricted PSIA 13 Credit risk absorbed by unrestricted PSIA 14 Market risk weighted assets 5 Operational risk weighted assets 100 RWA funded by profit equalization reserve of 16 unrestricted PSIA (credit risk) 17 Alpha (a) 18 0.3Explanation / Answer
Tire 2 complaint sukuk murabahah
2000
100%
2000
Short term subordinated debt
2000
100%
2000
Credit risk weighted assets
1000
100%
1000
Credit risk absorbed by PSIA
200
0%
0
Credit risk absorbed by unrestricted PSIA
500
0%
0
Market risk weighted assets
50
30%
15
Operational risk weighted assets
100%
0
Unrestricted PSIA credit risk
50
100%
50
Total risk weighted assets
5065
Paid up share capital
3000
Proportion of capital to RWA
Total risk weighted assets
5065
Paid up share capital
3000
Proportion of capital to RWA (%)
59.23001
As the minimum capital requirement is 8% of RWA as provided in the information it is clear that the Bank X has fulfilled the minimum capital requirements as the bank has 59.23% of capital of RWA.
Tire 2 complaint sukuk murabahah
2000
100%
2000
Short term subordinated debt
2000
100%
2000
Credit risk weighted assets
1000
100%
1000
Credit risk absorbed by PSIA
200
0%
0
Credit risk absorbed by unrestricted PSIA
500
0%
0
Market risk weighted assets
50
30%
15
Operational risk weighted assets
100%
0
Unrestricted PSIA credit risk
50
100%
50
Total risk weighted assets
5065
Paid up share capital
3000
Proportion of capital to RWA
Total risk weighted assets
5065
Paid up share capital
3000
Proportion of capital to RWA (%)
59.23001
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