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)(o) Securitisation exposure: Calculation of risk weight
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[Regulation 23 (11)(o) heading substituted by section 2(kk) of Notice No. 2561, GG46996, dated 30 September 2022 - effective 1 October 2022]

 

(o)Securitisation exposure: Calculation of risk weight

 

(i)        The formulation of the SEC-IRBA is as follows:

 

N2561 Reg 23(6) Amend 13

 

Where:

 

KSSFA(KIRB) is the capital requirement per unit of securitisation exposure under the SEC-IRBA which is a function of three variables, labelled a, u and l. The constant e is the base of the natural logarithms (which equals 2.71828). The variables a, u and l are defined as follows:

 

a =  –(1/(p*KIRB))

 

u = D – KIRB I =

 

max (A - KIRB; 0)

 

(ii) The risk weight assigned to a securitisation exposure when applying the SEC-IRBA is calculated as follows:

 

(A) When (D) for a securitisation exposure is less than or equal to KIRB, the exposure must be assigned a risk weight of 1250%.

 

(B) When (A) for a securitisation exposure is greater than or equal to KIRB, the risk weight of the exposure, expressed as a percentage, would equal K_SSFA(KIRB) times 12.5.

 

(C) When (A) is less than KIRB and (D) is greater than KIRB, the applicable risk weight is a weighted average of 1250% and 12.5 times K_SSFA(KIRB) according to the following formula:

 

N2561 Reg 23(6) Amend 12

 

(iii)The risk weight for market risk hedges such as currency or interest rate swaps will be inferred from a securitisation exposure that is pari passu to the swaps or, if such an exposure does not exist, from the next subordinated tranche.

 

(iv) The resulting risk weight is subject to a floor risk weight of 15%.

 

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