Guidelines on the Differential Premium Systems - PIDM

Ref No DI/GL2-A1/2011(DPS) Issued on 4 March 2011TITLE<strong>Guidelines</strong> on The Differential Premium SystemsA member’s return on risk-weighted assets ratio shall be scored based on thefollowing range of results:Table 5: Score Range for Return on Risk-weighted Assets RatioReturn on Risk-weighted Assets RatioRange of ResultsScoreReturn on Risk-weighted Assets Ratio ≥ 2.75% 8Return on Risk-weighted Assets Ratio ≥ 2.25% but < 2.75% 6Return on Risk-weighted Assets Ratio ≥ 1.75% but < 2.25% 4Return on Risk-weighted Assets Ratio ≥ 1.00% but < 1.75% 2Return on Risk-weighted Assets Ratio < 1.00% 0(d)Mean adjusted return volatilityMean adjusted return volatility is calculated as the semi-standard deviation of amember’s profit or loss before tax and zakat over a three-year period divided by itsmean profit or loss before tax and zakat over the same period.A member’s mean adjusted return volatility shall be scored based on the followingrange of results:Table 6: Score Range for Mean Adjusted Return VolatilityMean Adjusted Return VolatilityRange of ResultsMean Adjusted Return Volatility ≥ 0 but ≤ 0.3 7Mean Adjusted Return Volatility > 0.3 but ≤ 0.7 4Mean Adjusted Return Volatility > 0.7 0Mean Adjusted Return Volatility is negative or the mean profit / (loss)before tax and zakat is zeroScore0Notes:A member which has less than three years of profit or loss before tax and zakat datashall not be assigned a score for this ratio. The scores for this ratio shall bedetermined on a proportionate basis as specified in paragraph 4.5 (InsufficientQuantitative Information).Page 7