Minimum Capital Requirements for Market Risk

Market capitalisation (market cap) is defined as the sum of the market capitalisations based on the market value of the total outstanding shares issued by the same listed legal entity or a group of legal entities across all stock markets globally, where the total outstanding shares issued by the group of legal entities refer to cases where the listed entity is a parent company of a group of legal entities. Under no circumstances should the sum of the market capitalisations of multiple related listed entities be used to determine whether a listed entity is “large market cap” or “small market cap”. 7.74 Large market cap is defined as a market capitalisation equal to or greater than USD 2 billion and small market cap is defined as a market capitalisation of less than USD 2 billion. 7.75 The advanced economies are Canada, the United States, Mexico, the euro area, the non-euro area western European countries (the United Kingdom, Norway, Sweden, Denmark and Switzerland), Japan, Oceania (Australia and New Zealand), Singapore and Hong Kong SAR. An equity issuer must be allocated to a particular bucket according to the most material country or region in which the issuer operates. As stated in [7.76]: “For multinational multisector equity issuers, the allocation to a particular bucket must be done according to the most material region and sector in which the issuer operates. 7.76 To assign a risk exposure to a sector, banks must rely on a classification that is commonly used in the market for grouping issuers by industry sector. (1) The bank must assign each issuer to one of the sector buckets in the table under [7.72] and it must assign all issuers from the same industry to the same sector. (2) Risk positions from any issuer that a bank cannot assign to a sector in this fashion must be assigned to the other sector (ie bucket 11). (3) For multinational multi-sector equity issuers, the allocation to a particular bucket must be done according to the most material region and sector in which the issuer operates. 7.77 For calculating weighted sensitivities, the risk weights for the sensitivities to each of equity spot price and equity repo rates for buckets 1 to 13 are set out in Table 10: Risk weights for buckets 1 to 13 for sensitivities to equity risk Table 10 Bucket number Risk weight for equity spot price Risk weight for equity repo rate 1 55% 0.55% 2 60% 0.60% 3 45% 0.45% 4 55% 0.55% 5 30% 0.30% 6 35% 0.35% 7 40% 0.40% 8 50% 0.50% 9 70% 0.70% 10 50% 0.50% 11 70% 0.70% 12 15% 0.15% 13 25% 0.25%