Title[ Part 1: Scope of Application
Section[ 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).
ILLUSTRATION OF NEW SCOPE OF APPLICATION OF THIS FRAMEWORK
Diversified Fnancial Group
(1) Holding Company
(2) Internationally Active Bank
(3)Internationally Active Bank
Domestic Bank
Securities Firm
(4) Internationally Active Bank
(1): Boundary of predominant banking group. The Framework is to be applied at this level on a consolidated basis, i.e. up to holding company level (paragraph 21).
(2), (3) and (4): The Framework is also to be applied at lower levels to all internationally active banks on a consolidated basis.
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