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Article (4) Consequential Adjustments due to Transitional Arrangement

C 4/2020 Effective from 22/4/2020
  1. 13.All Banks and Finance Companies are required to recalculate the regulatory capital requirements which are directly affected by ECL, by making the following adjustments to regulatory capital:
    1. a)The amount of deferred tax assets that shall be deducted by Banks from Capital in accordance with regulatory adjustment and threshold adjustment or risk weighted as per Section 3.10 of the Tier Capital Supply Standard (contained in the “Standards for Capital Adequacy of Banks in the UAE” issued under the CBUAE Notice No. 1733/2020).
    2. b)The specific provision credit risk adjustments by which the exposure value is reduced under the Standardized Approach for credit risk should be reduced by a factor, which has the effect of increasing the exposure value. This would ensure that Banks and Finance Companies would not benefit from both an increase in Capital due to transitional arrangements as well as a reduced exposure value.
    3. c)The amount of Tier 2 capital for Banks calculated as per Section 2.5 of the Tier Capital Supply Standard (contained in the “Standards for Capital Adequacy of Banks in the UAE” issued under the CBUAE Notice No. 1733/2020).
    4. d)Any other exposure or capital element which is directly affected by the ECL provision to ensure they do not receive an inappropriate capital relief.