• PRU 3.5 PRU 3.5 Risk Capital Requirement

    • PRU 3.5.1

      An Authorised Person must calculate its Risk Capital Requirement as the sum of the following:

      (a) the Credit Risk Capital Requirement (CRCOM);
      (b) the Market Risk Capital Requirement;
      (c) the Operational Risk Capital Requirement;
      (d) the Displaced Commercial Risk Capital Requirement, where applicable; and
      (e) the CVA Risk Capital Requirement.

    • CRCOM

      • PRU 3.5.2 PRU 3.5.2

        An Authorised Person must calculate its Credit Risk Capital Requirement in accordance with the applicable Rules in Chapter 4.

        • Guidance

          1. Detailed Rules and Guidance in respect of the CRCOM are specified in Chapter 4. The CRCOM is based on the risk weighted assets (RWA) for all Credit Risk Exposures, securitisation Exposures and Counterparty Risk Exposures.
          2. Rules and Guidance in respect of calculating the CRCOM for Islamic Contracts are contained in the IFR Rules.

    • Market Risk Capital Requirement

      • PRU 3.5.3 PRU 3.5.3

        An Authorised Person must calculate its Market Risk Capital Requirement in accordance with the applicable Rules in Chapter 5.

        • Guidance

          1. Detailed Rules and Guidance in respect of the Market Risk Capital Requirement and each of its components are contained in Chapter 5.
          2. Rules and Guidance in respect of calculating Market Risk for Islamic Contracts are contained in the IFR rules.

    • Operational Risk Capital Requirement

      • PRU 3.5.4

        An Authorised Person must calculate its Operational Risk Capital Requirement in accordance with the applicable Rules in Chapter 6.

    • Displaced Commercial Risk Capital Requirement

      • PRU 3.5.5

        An Authorised Person Managing a Profit Sharing Investment Account which is a PSIAu must calculate its Displaced Commercial Risk Capital Requirement in accordance with the IFR rules.

    • CVA Risk Capital Requirement

      • PRU 3.5.6 PRU 3.5.6

        An Authorised Person must calculate its CVA Risk Capital Requirement in accordance with the applicable Rules in App5.

        • Guidance

          1. An Authorised Person should refer to Chapters 4, 5 and 6 to determine whether it is required to calculate a Credit Risk Capital Requirement (also referred to in these Rules as CRCOM), a Market Risk Capital Requirement or an Operational Risk Capital Requirement, respectively.
          2. The Displaced Commercial Risk Capital Requirement will only apply to an Authorised Person Managing a Profit Sharing Investment Account which is a PSIAu.
          3. An Authorised Person will also need to consider the relevant provisions in the IFR rules relating to Credit Risk and Market Risk for Islamic Contracts when calculating its CRCOM and Market Risk Capital Requirement.
          4. Where the Risk Capital Requirement is the binding Capital Requirement calculated using the provisions in Section 3.4 the Regulator may impose an Individual Capital Requirement (see Chapter 10) on an Authorised Person.
          Such a requirement is additional to the Risk Capital Requirement and is, therefore, a component of the Capital Requirement for the Authorised Person.

    • Total Risk Exposure Amount

      • PRU 3.5.7

        An Authorised Person must calculate its Total Risk Exposure Amount, after taking into account the provisions of Rule 3.5.8, as the sum of:

        (a) the Credit RWA as calculated using Rule 4.8.1(2);
        (b) the Risk Exposure Amount associated with the Market Risk Capital Requirement;
        (c) the Risk Exposure Amount associated with the Operational Risk Capital Requirement;
        (d) the Risk Exposure Amount associated with the CVA Risk Capital Requirement; and
        (e) the Risk Exposure Amount associated with Displaced Commercial Risk Capital Requirement, where applicable, calculated in accordance with IFR Rule 5.4.5.

      • PRU 3.5.8 PRU 3.5.8

        An Authorised Person must multiply the individual capital requirements referred to under points 3.5.7(b) to 3.5.7(e) by a factor of 12.5 in order to determine the Risk Exposure Amounts associated with those elements of the Total Risk Exposure Amount.

        • Guidance

          The Total Risk Exposure Amount must be calculated by Authorised Persons in Categories 1, 2, 3A and 5 for the determination of appropriate minimum Capital Resources and for reporting purposes.