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4.1. General
FINANCIAL SERVICES LEGISLATION
RULES
ISLAMIC BANKING BUSINESS PRUDENTIAL RULES
4. CAPITAL ADEQUACY
4.1. General
4.2. Application to branches
4.3. Governing Body’s responsibilities
4.4. Systems and controls
4.5. Internal Capital Adequacy Assessment Process (ICAAP)
4.6. Initial and ongoing Capital requirements
4.7. Base Capital requirement
4.8. Required Tier 1 Capital on authorisation
4.9. Required ongoing Capital
4.10. Risk Capital requirement
4.11. Capital adequacy ratios
4.12. Elements of regulatory Capital
4.13. Common Equity Tier 1 Capital
4.14. Criteria for classification as common shares
4.15. Additional Tier 1 Capital
4.16. Criteria for inclusion in Additional Tier 1 Capital
4.17. Tier 2 Capital
4.18. Criteria for inclusion in Tier 2 Capital
4.19. Mudarabah sukuk or wakalah sukuk as Tier 2 Capital
4.20. Requirements—loss absorption at point of non-viability
4.21. Requirements for writing-off
4.22. Inclusion of third parties’ interests
4.23. Criteria for third party interests—Common Equity Tier 1 Capital
4.24. Criteria for third party interests—Additional Tier 1 Capital
4.25. Criteria for third party interests—Tier 2 Capital
4.26. Treatment of third party interests from SPVs
4.27. Regulatory adjustments
4.28. Approaches to valuation and adjustment
4.29. Definitions
4.30. Adjustments to Common Equity Tier 1 Capital
4.31. Goodwill and intangible assets
4.32. Deferred tax assets
4.33. Cash flow hedge reserve
4.34. Cumulative gains and losses from changes to own credit risk
4.35. Defined benefit pension fund assets
4.36. Securitisation gains on sale
4.37. Assets lodged or pledged to secure liabilities
4.38. Acknowledgments of debt
4.39. Accumulated losses
4.40. Deductions from categories of Regulatory Capital
4.41. Investments in own shares and Capital instruments
4.42. Reciprocal cross holdings
4.43. Non-significant investments—aggregate is less than 10% of firm’s Common Equity Tier 1 Capital
4.44. Non-significant investments—aggregate is 10% or more of firm’s Common Equity Tier 1 Capital
4.45. Significant investments
4.46. Deductions from Common Equity Tier 1 Capital
Entire Act

4.1. General

(1) An Islamic Bank’s total Capital Resources are defined as the sum of its Tier 1 Capital and Tier 2 Capital. The categories and elements of regulatory Capital, and the limits, restrictions and adjustments to which they are subject are set out in this Chapter.

(2) Capital supports an Islamic Bank’s operation by providing a buffer to absorb unexpected losses from its activities and, in the event of problems, it enables an Islamic Bank to continue to operate in a sound and viable manner while the problems are resolved. Capital management must be an integral part of an Islamic Bank’s enterprise-wide risk management process and must align an Islamic Bank’s risk tolerance and risk profile with its capacity to absorb losses.