Banks Act, 1990 (Act No. 94 of 1990)

Regulations

Regulations relating to Banks

Chapter II : Financial, Risk-based and other related Returns and Instructions, Directives and Interpretations relating to the completion thereof

23. Credit risk: monthly return

Directives and interpretations for completion of monthly return concerning credit risk (Form BA 200)

Subregulation (11) Method 1 : Calculation of credit risk exposure in terms of the foundation IRB approach

Subregulation (11)(g) Securitisation exposure: internal assessment approach
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(g)Securitisation exposure: Internal Assessment Approach (IAA)

 

Subject to the approval by the Authority, a bank may use its internal assessments of the credit quality of its securitisation exposures extended to an asset–backed commercial paper programme (example, liquidity facilities or credit-enhancement facilities) provided that the bank has at least one approved IRB model (which does not need to be applicable to the securitised exposures) in order to calculate the bank’s required amount of capital and reserve funds, and provided that—

(i) the bank’s internal assessment process shall comply with the relevant requirements specified in paragraph (h) below;
(ii) the bank shall map its internal assessment of exposures extended to the asset-backed commercial paper programme to equivalent external ratings issued by an eligible external credit assessment institution, which rating equivalents shall be used by the bank to determine the appropriate risk weights relating to the relevant exposure in terms of the SEC-ERBA for the exposures as specified in subregulation 23(6)(h)(k)(i) above;
(iii) the exposure amount of the securitisation exposure to the ABCP programme must be assigned to the risk weight in the SEC-ERBA based on the credit rating assigned to the bank’s exposure;
(iv) when, in the opinion of the Authority, the bank’s internal assessment process does not comply with the relevant requirements specified in this paragraph (g), or such further conditions as may be specified in writing by the Authority, the bank shall for such time and on such conditions as may be specified in writing by the Authority apply the SEC-SA specified in subregulation (xvi) above in order to calculate its required amount of capital and reserve funds relating to both existing and newly originated exposures extended to an asset-backed commercial paper programme.

 

[Regulation 23(11)(g) substituted by section 2(ee) of Notice No. 2561, GG46996, dated 30 September 2022 - effective 1 October 2022]