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

24. Credit risk: quarterly return

Directive and interpretations for completion of the quarterly return concerning credit risk (Form BA 210)

Subregulation (10)

Items relating to credit concentration risk - Herfindahl-Hirschman Index (HHI): IRB approach
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Items relating to credit concentration risk - Herfindahl-Hirschman Index (HHI): IRB approach

 

Item number

Description

318 to 334

Wholesale HHI

In order to identify potential concentration in the reporting bank's relevant credit portfolios, the bank shall, based on its risk weighted assets calculated in accordance with the relevant requirements specified in these Regulations, calculate its relevant Herfindahl-Hirschman Index, which index—

(a)

is defined as HHI = S (proportion of total value)2

(b)

shall in the case of wholesale exposure be based on specified industries;

(c)

may range in value, with the most diversified portfolio reflecting a calculated value close to zero and the most concentrated portfolio reflecting a calculated value close or equal to 100 per cent.

335 to 340

Retail HHI

In order to identify potential concentration in the reporting bank's relevant credit portfolios, the bank shall, based on its risk weighted assets calculated in accordance with the relevant requirements specified in these Regulations, calculate its relevant Herfindahl-Hirschman Index—

(a)

which risk weighted assets shall be divided by the relevant number of clients in order to determine the relevant average amount of risk weighted assets per client;

(b)

which index is defined as HHI = S (proportion of total value)2

(c)

which index shall in the case of retail exposure be based on specified products;

(d)

which index may range in value, with the most diversified portfolio reflecting a calculated value close to zero and the most concentrated portfolio reflecting a calculated value close or equal to 100 per cent.