| (1) | The content of the relevant return is confidential and not available for inspection by the public. |
| (2) | The purpose of the return, amongst other things, is to determine— |
| (a) | the relevant notional amounts underlying all contracts in derivative instruments entered into during the reporting month, that is, the turnover in respect of transactions in derivative instruments entered into during the reporting month; |
| (b) | the relevant notional amounts underlying all contracts in derivative instruments that had not yet terminated at month-end, that is, the notional amounts underlying all unexpired derivative contracts; |
| (c) | the relevant fair value amounts underlying all contracts in derivative instruments that had not yet terminated at month-end, that is, the fair value amount underlying all unexpired derivative contracts. |
| (a) | distinguishes between transactions entered into in respect of credit-derivative instruments and transactions entered into in respect of derivative instruments other than credit-derivative instruments; |
| (b) | distinguishes between the broad categories of risk, including credit risk, interest rate risk, foreign exchange risk, equity risk and commodity risk; |
| (c) | distinguishes between the various types of instrument, including forwards, swaps and options; |
| (d) | determines whether the reporting bank primarily conducts business in over-the-counter derivative instruments or exchange-traded contracts (in order to distinguish risk profiles); and |
| (e) | determines whether derivative instruments are used for trading purposes or banking purposes, such as hedging. |
| (4) | A bank shall have in place a written policy relating to derivative instruments, which policy— |
| (a) | shall be approved by the bank's board of directors; |
| (b) | shall duly specify the criteria for determining which derivative instruments are classified as part of the bank's trading activities and which of the said items are classified as part of the bank's banking activities; |
| (c) | shall duly specify any relevant limits relating to transactions in derivative instruments; and |
| (d) | shall ensure that transactions in derivative instruments are subject to adequate internal controls and appropriate internal audit coverage. |
(5) Matters relating to notional amounts
| (i) | reflect the nominal amounts underlying the respective derivative contracts listed in the form BA 350; |
| (ii) | are the contracted base values on which payments and receivables are calculated; |
| (iii) | in relation to derivative contracts with multiplier components shall be the contracts' effective notional amounts or par values. For example, the effective notional amount of a swap contract with a stated notional amount of R1 000 000 and a specified quarterly settlement rate multiplied by 10 shall be R10 000 000. |
| (b) | For the purposes of reporting notional amounts on the form BA 350, when a bank, for example, enters into a swap contract with an underlying notional amount of R100 million, in terms of which contract the bank pays interest at a fixed interest rate and receives interest at a floating interest rate, the bank shall report in the relevant specified line items of the form BA 350 the said notional amount of the contract, that is, R100 million, and not R200 million. |
The fact that the bank effectively established a position or positions equivalent to a liability of R100 million in respect of which the bank pays fixed interest, and an asset of R100 million in respect of which the bank receives floating or variable interest, does not alter the fact that the said contract's underlying notional amount is R100 million.
| (6) | Matters relating to fair value |
For purposes of this regulation 32, unless specifically otherwise stated in this regulation 32 or directed in writing by the Registrar, fair value—
| (a) | shall have the same meaning as specified in relevant Financial Reporting Standards issued from time to time; |
| (b) | is regarded as a broader term than market value since the market value of an instrument usually refers to the price obtainable in an active market. |
| (7) | A bank shall complete the form BA 350 in accordance with such instructions or requirements as may be determined or directed in writing by the Authority. |
[Regulation 32(7) substituted by section 32 of Notice 5802, GG52013, dated 31 January 2025, shall come into operation on 1 February 2025]
