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Basel ii Accord
Sections 35 to
39 |
V. Significant
investments in commercial
entities
35.
Significant minority and majority investments in
commercial entities which
exceed
certain
materiality levels will be deducted from banks’
capital. Materiality levels will
be
determined
by national accounting and/or regulatory
practices.
Materiality
levels of 15% of the bank’s capital for
individual significant investments in commercial
entities and 60% of the bank’s capital for the
aggregate of such investments, or stricter
levels, will be applied. The amount to be
deducted will be that portion of the investment
that exceeds the materiality
level.
36.
Investments in significant minority- and
majority-owned and -controlled
commercial
entities
below the materiality levels noted above will be
risk-weighted at no lower than
100%
for
banks using the standardised approach.
For
banks using the IRB approach, the investment
would be risk weighted in accordance with the
methodology the Committee is developing for
equities and would not be less than
100%.
VI. Deduction of
investments pursuant to this
part
37.
Where deductions of investments are made
pursuant to this part on scope
of
application,
the deductions will be 50% from Tier 1 and 50%
from Tier 2 capital.
38.
Goodwill relating to entities subject to a
deduction approach pursuant to this
part
should
be deducted from Tier 1 in the same manner as
goodwill relating to
consolidated
subsidiaries,
and the remainder of the investments should be
deducted as provided for in
this
part.
A similar treatment of goodwill should be
applied, if using an alternative
group-wide
approach
pursuant to paragraph 30.
39.
The limits on Tier 2 and Tier 3 capital and on
innovative Tier 1 instruments will
be
based
on the amount of Tier 1 capital after deduction
of goodwill but before the deductions
of
investments
pursuant to this part on scope of application
(see Annex 1 for an example how
to
calculate the 15% limit for innovative Tier 1
instruments).
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