4.7. Capital Requirements

(1) A Bank is required to meet minimum risk-based capital requirements for exposure to Credit Risk, market risk and operational risk, under these rules. The Bank’s capital ratios (consisting of CET 1 ratio, total tier 1 ratio and total capital ratio) are calculated by dividing its Regulatory Capital by total Risk-Weighted Assets (RWAs).

(2) Total RWAs of a Bank is the sum of:

1. (a) the Bank’s RWAs for all on-balance-sheet and off-balance-sheet Credit Risk exposures calculated in accordance with the rules in Chapter 5 of BBR; and
2. (b) 12.5 times the sum of the Bank’s market and operational risk capital requirements (to the extent that each of those requirements applies to the Bank) calculated in accordance with the rules in Chapters 6 and 7 of BBR respectively

(3) In this Chapter, consolidated Subsidiary, of a Bank, means:

1. (a) a Subsidiary of the Bank; or
2. (b) a Subsidiary of a Subsidiary of the Bank.

4.8. Required Tier 1 Capital on authorisation

A Bank must have, at the time of its authorisation and at all times thereafter, Common Equity Tier 1 Capital (CET1 Capital) as defined in Rule 4.14, at least equal to the Base Capital Requirement applicable to it. The AFSA will not grant an authorisation for conducting Banking Business unless it is satisfied that the entity complies with this requirement.

4.9. Required ongoing capital

(1) A Bank must have at all times, Capital at least equal to the higher of:

1. (a) its Base Capital requirement; and
2. (b) its Risk-based Capital requirement.

Note A Bank whose minimum capital requirement is determined by its risk-based capital requirement is subject to the additional requirement to maintain a Capital Conservation Buffer, as defined in Rule 4.31.

(2) The amount of Capital that a Bank must have, in accordance with these rules, is its Minimum Capital Requirement.

4.10. Base Capital Requirement

The Base Capital Requirement is:

1. (a) for a Bank — USD 10 million;
2. (b) for a Broker Dealer — USD 500,000;
3. (c) for a Credit Provider – USD 2 million;
4. (ca) for a Credit Provider providing only Commercial Captive Finance – USD 500,000;
5. (d) for an Authorised Firm Arranging Credit Facility – USD 10,000;
6. (e) for an Authorised Firm Advising on Credit Facility – USD 10,000;
7. (f) for an Authorised Firm Providing Money Services – USD 200,000.

4.11. Risk-based Capital Requirement

(1) The Risk-based Capital Requirement for a Bank is the sum of:

1. (a) its Credit Risk capital requirement;
2. (b) its Market Risk Capital Requirement; and
3. (c) its Operational Risk Capital Requirement.

(2) The Market Risk and Operational Risk Capital Requirements are required to be calculated according to the rules in Chapters 6 and 7 of BBR respectively.

(3) The Credit Risk Capital Requirement must be calculated as 8% of the Bank’s risk-weighted onbalance-sheet and off-balance-sheet Credit Risk exposures calculated in accordance with the rules in Chapter 5 of BBR.

4.12. Capital ratios

(1) A Bank’s capital adequacy is measured in terms of 3 capital ratios expressed as percentages of its total Risk-Weighted Assets (RWAs).

(2) A Bank’s minimum capital ratios are:

• (a) a CET 1 Capital ratio of 4.5%;
• (b) a Tier 1 Capital (T1 Capital) ratio of 6%; and
• (c) a Total Capital ratio of 8%.

(3) The AFSA may, if it believes it is prudent to do so, increase any or all of a Bank’s minimum capital ratios. The AFSA will notify the Bank in writing about a higher capital ratio and the timeframe available for the Bank to meet it.

(4) A Bank must maintain at all times capital ratios higher than the required minimum levels specified in Rule 4.12 (2).