Primary reference: BPRD Circular Letter No. 21 of 2026, Appendix-A, issued 23 October 2026 · Detailed research review: 25 October 2026. Consult the original instrument and any later amendments; draft measures are not operative until approved and commenced.
BPRD Circular Letter 21/2026 replaces Chapter 4 on capital requirements for fund units from 31 December 2026. Appendix-A sets three calculation methods—look-through, mandate-based and a 1,000% risk-weight fallback—and separate REIT treatment.
Three actual approaches in the new Appendix-A
Under paragraph 4.2, the look-through approach (LTA) applies where a fund provides sufficiently granular data on underlying exposures, at least as frequently as the bank/DFI's financial reporting, and those data are independently verified. The bank/DFI then calculates risk weights as though it directly held the underlying assets.
If a bank relies on qualifying third-party risk-weight calculations rather than calculating them itself, the appendix prescribes risk weights 1.2 times the otherwise applicable underlying risk weights.
Where LTA's data conditions are not satisfied but reliable information about the investment mandate or applicable rules exists, the mandate-based approach (MBA) assumes the fund invests to the greatest extent allowed in the highest-capital-requirement assets first. Where neither method is usable, the fallback approach (FBA) assigns a 1,000% risk weight to the fund investment.
Leverage adjustment, books and fund-of-funds
Paragraph 4.3 distinguishes banking-book holdings, measured under credit-risk standardised rules, from trading-book positions, measured under the applicable market-risk capital framework. Capital under LTA/MBA is adjusted for the fund's leverage and average risk weights, capped at a 1,000% risk weight. In shorthand, the appendix specifies risk-weighted assets = min(average risk weight × fund leverage, 1,000%) × equity investment in the fund.
For indirect holdings of nested funds, the appendix prescribes look-through or fallback depending on which approach was used for successive layers. In particular, further look-through is unavailable when the preceding layer was not measured with LTA.
Specific treatment of REITs and AMCs
Paragraph 4.3.3 places bank investments in REITs in the banking book with a 100% risk weight. This is distinct from the 1,000% fallback applied where adequate information for other covered fund investments is unavailable.
Paragraph 4.4 treats significant holdings in an asset management company's capital under separate rules for investments in financial entities, rather than the ordinary fund-unit treatments.
The circular replaces Chapter 4 of the instructions under BPRD Circular No. 6 of 2013 effective 31 December 2026; banks/DFIs should not represent this replacement as already in force before that date.
What do the exact changes mean for affected organisations?
Regulatory-capital teams should classify fund investments by the available verified exposure data, model LTA/MBA/FBA outcomes, assess leverage and prepare for 31 December implementation.
Specific compliance and response checklist
- Inventory mutual fund, private equity, venture capital and REIT holdings by fund and banking/trading book.
- Obtain independently verified underlying-asset information where LTA treatment is sought.
- Model the 1.2× third-party factor, 1,000% fallback and leverage adjustment as applicable.
- Apply the REIT 100% risk-weight provision correctly and test implementation before 31 December 2026.
Timing and legal status
Issued 23 October 2026; the replacement Chapter 4 takes effect 31 December 2026.
Calculation details depend on the full two-page SBP Appendix-A and linked existing capital-adequacy chapters. Different risk-weight methods must not be conflated.
SBP official Appendix-A to BPRD Circular Letter 21/2026 — new Chapter 4 and calculation methods