1.This Standard articulates specific requirements for the calculation of the market risk capital requirement for banks in the UAE. It is based closely on requirements of the framework for capital adequacy developed by the Basel Committee on Banking Supervision (BCBS), specifically as articulated in Basel II: International Convergence of Capital Measurement and Capital Standards, June 2006, and subsequent revisions and clarifications thereto.

2.This Standard applies to:

• •the risks pertaining to interest rate related instruments and equities in the trading book; and
• •foreign exchange risk and commodities risk throughout the bank.

3.Capital requirements for market risk apply on a consolidated basis for all banks in the UAE. Note that the capital required for general and specific market risk under this Standard is in addition to, not in place of, any capital required under other Central Bank Standards. Banks should follow the requirements of all other applicable Central Bank Standards to determine overall capital adequacy requirements; for example, the Counterparty Credit Risk Standard.

4.The Standards follow the calibration developed by the Basel Committee, which includes a maximum risk weight of 1250%, calibrated on a total capital adequacy requirement of 8%. The UAE instituted a higher minimum capital requirement of 10.5% (excluding capital buffers), applicable to all licensed banks. Consequently, the maximum capital charge for a single exposure will be the lesser of the value of the exposure after applying valid credit risk mitigation, netting and haircuts, and the capital resulting from applying a risk weight of 952% (reciprocal of 10.5%) to this exposure.