Banks Act, 1990 (Act No. 94 of 1990)RegulationsRegulations relating to Banks' Financial Instrument TradingChapter 3 : Capital11. Capital-adequacy requirements relating to trading books of banks |
| (1) | Subject to the provisions of subregulation (2) below, a bank shall at all times hold allocated capital equal to the higher of— |
| (a) | three months' (13 weeks') operating costs (calculated in terms of subregulation (4)(b) below); or |
| (b) | the amount of capital applicable to the bank's specific category of business, as determined in accordance with Table 1 hereunder: |
Table 1
Category of business |
Capital Requirement |
Banks that do not have access to the cash or scrip of any client without referral to the client or its agent. |
R200 000 |
Banks that have access to the cash or scrip of a client without referral to the client or its agent. |
R400 000 |
| (2) | A bank shall in addition to the amount of capital held in terms of subregulation (1) above hold allocated capital in respect of the following risks— |
| (a) | position; |
| (b) | counterparty/settlement; |
| (c) | large exposures. |
| (3) | The provisions of subregulation (1)(b) above shall not apply in the case where a bank is conducting business for its own account or agency business for other banks, if all such business is fully guaranteed in terms of a written agreement with a clearing member of a financial exchange. |
| (4) | For purposes of subregulations (1) and (2) above— |
| (a) | allocated capital shall be calculated as set out in Table 2, hereunder: |
Table 2
Allocated capital |
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The sum of— |
(A) |
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The sum of— |
(B) |
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The sum of— |
(C) |
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A + B - C = ALLOCATED CAPITAL |
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| (b) | the operating cost of: a bank's trading activities shall be calculated to represent one quarter of the amounts that appear in its most recent audited annual financial statements and that relate to trading activities, calculated as follows: |
| (i) | total revenue plus |
| (ii) | loss before taxation; |
less the aggregate of the following items:
| (iii) | profit before taxation; |
| (iv) | bonuses paid out of relevant year's profits and which were not guaranteed; |
| (v) | profit shares and other appropriations of profit except for a fair (market-related) or guaranteed remuneration that is payable even if the bank makes a loss for the year; |
| (vi) | commissions paid other than to employees, or appointed representatives of the bank; |
| (vii) | fees, brokerage and other charges paid to clearing houses, clearing firms, exchanges and intermediate brokers for the purpose of executing, registering or clearing transactions, excluding charges not related to the continuation of trading activities; |
| (viii) | interest that is trade related (such as that applicable to repurchase agreements) to be paid to counterparties; |
| (ix) | abnormal or extraordinary items, with the prior written approval of the Registrar; |
| (x) | losses arising on the conversion of foreign-currency balances in the trading book. |
| (c) | when a bank does not have interim audited financial statements, the following shall apply— |
| (i) | when the bank has just commenced trading activities or has not been trading long enough to have submitted audited financial statements, the bank shall calculate its relevant expenditure on a budgeted or a business plan that has been submitted with its application for registration; or |
| (ii) | when the bank's accounts do not represent a 12-month period the bank shall, with the prior written approval of the Registrar, calculate its relevant expenditure on an annualised basis. |
| (d) | the Registrar may adjust the relevant annual expenditure in instances where— |
| (i) | there has been a significant change in the circumstances or trading activities of a bank; or |
| (ii) | the bank has a material proportion of its expenditure borne on its behalf by a subsidiary and such expenditure is not fully recovered from the bank. |