4. CREDIT RISK (CONTINUED) 4.7 Assignment of Risk Weights for Portfolios Under the Standardised Approach (continued) Unrated and Rated Counterparties As a general rule, the rating specific to the credit exposure is used, i.e., the issue rating. Where no specific rating exists, the credit rating assigned to the issuer or counterparty of that particular credit exposure is used. In cases where an exposure has neither an issue nor an issuer rating, it is deemed as unrated or the rating of another rated obligation of the same counterparty may be used if the exposure is ranked at least pari passu with the obligation that is rated, as stipulated in the CAFIB Guideline. Where a counterparty or an exposure is rated by more than one ECAI, the second highest rating is used to determine the risk weight. In cases where the credit exposures are secured by guarantees issued by eligible or rated guarantors, the risk weights similar to that of the guarantor are assigned. The below table summarises the rules governing the assignment of risk weights under the Standardised Approach: Rating Category S & P MOODY’S FITCH RAM MARC 1 AAA to AA- Aaa to Aa3 AAA to AA- AAA to AA3 AAA to AA2 A+ to A- A1 to A3 A+ to A- A1 to A3 A+ to A3 BBB+ to BBB- Baa1 to Baa3 BBB+ to BBB- BBB1 to BBB3 BBB+ to BBB4 BB+ to BB- Ba1 to Ba3 BB+ to BB- BB1 to BB3 BB+ to BB5 B+ to B- B1 to B3 B+ to B- B1 to B3 B+ to B6 CCC+ and below Caa1 and below CCC+ and below C1 and below C+ and below The below table summarises risk weight mapping matrix for each credit quality rating category: Risk Weights Based on Credit Rating of the Counterparty Exposure Class Rating Category Banking Institutions Sovereign and Central Banks Corporate Maturity > 6 month Maturity <= 6 month Maturity <= 3month 1 0% 20% 20% 20% 20% 2 20% 50% 50% 20% 3 50% 100% 50% 20% 4 100% 100% 100% 50% 5 100% 150% 100% 50% 6 150% 150% 150% 150% Unrated 100% 100% 50% 20% Under CAFIB, exposures to and/or guaranteed by the Federal Government of Malaysia and Bank Negara Malaysia are accorded a preferential sovereign risk weight of 0%. 439 www.bankislam.com 1 2 3 4 5 6 7 8 9 FINANCIAL STATEMENTS
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