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 (14) Credit-risk mitigation: advanced IRB approach

Subregulation (14)(b) Collateral
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(b)Collateral

 

(i)Unless specifically otherwise provided in this subregulation (14), a bank that adopted the advanced IRB approach for the measurement of the bank's exposure to credit risk shall in addition to the minimum requirements specified below, comply with the relevant requirements specified in subregulation (7)(b)(iii) above.

 

(ii)Risk weighting

 

When a bank that adopted the advanced IRB approach for the measurement of the bank's exposure to credit risk obtains collateral in respect of the bank's exposure to corporate institutions, sovereigns or banks the bank may calculate its own LGD ratios in respect of the said protected exposure, provided that—

 

(A)the bank shall comply with the relevant minimum conditions specified in subregulation (13)(b)(v)(C) above, provided that when the bank is unable to comply with the said minimum requirements relating to the use of the bank's own estimates of LGD, the bank shall calculate the relevant exposure's LGD ratios in accordance with the relevant requirements of the foundation IRB approach specified in subregulation (11)(d)(ii) above;

 

(B)the bank shall measure the LGD ratio as a percentage of the exposure's EAD amount;

 

(C)when the bank wishes to recognise the effect of a master netting agreement in respect of repurchase and resale agreements concluded with corporate institutions, sovereigns or banks, the bank shall calculate an adjusted exposure (E*) in accordance with the relevant requirements specified in subregulation (9)(b)(ix) above, which adjusted exposure shall be deemed to represent the exposure's EAD amount, provided that the bank may calculate its own estimate of LGD in respect of the relevant unsecured portion of the relevant exposure;

 

(D)irrespective of its credit rating, a resecuritisation instrument shall in no case constitute an eligible instrument for risk mitigation purposes in terms of these Regulations.