Respective requirements specified in D8/2023, effective from proposed implementation dates specified in Guidance Note 3/2023 (G3-2023), see #179806, i.e. on Jul. 1, 2025.
On Mar. 13, RSA CB issued proposed directive on threshold amounts.
RSA CB proposed directive on threshold amounts related to revised standardized and internal ratings-based approaches for credit risk and the liquidity risk framework.
Following global financial crisis, various standard-setting bodies agreed to put in place, among other things, comprehensive measures, policies, regulations and reforms to promote financial stability and safety and soundness of individual financial institutions.
In Dec. 2017, the Basel Committee on Banking Supervision (BCBS) issued the revised standardised approach (STA) and internal ratings-based (IRB) approach for credit risk.
Proposed Directive
Revised approach include new threshold amounts used in classification of credit risk exposures, calculation of minimum required capital and reserve funds, and reporting.
Some thresholds impact classification of assets and liabilities in calculating net stable funding ratio (NSFR) and liquidity coverage ratio (LCR) in liquidity risk framework.
These threshold amounts also impact the classification of assets and liabilities in the liquidity risk and interest rate risk in the banking book (IRRBB) frameworks.
Directive's purpose is to specify appropriate threshold amounts to be used by banks, controlling companies, branches of foreign institutions in implementing requirements of the revised STA and IRB approach and the liquidity risk and IRRBB frameworks.
The proposed directive replaces Directive 1 of 2016 dated Apr. 12, 2016.
Thresholds
Banks directed to classify an exposure to an entity, institution, small business in retail asset class, provided aggregate amount of exposures is less than or equal to R12.5mn.
Banks must classify exposure in QRRE asset class if, as well as complying with reg 23(11)(c)(iv)(B)(ii)(dd), aggregate exposure amount is less than or equal to R1.5mn.
For calculating minimum required capital and reserve funds for exposures to SME, the firm-size adjustment apply to entities where reported turnover/sales for consolidated group of which SME is member is greater than R60mn but less than/equal to R600mn.
For the purpose of reporting credit exposures in the relevant asset classes of the regulatory returns, banks must classify all exposures as corporate SME exposures if reported turnover of the corporate entity/institution is less than or equal to R600mn.
For calculating minimum required capital and reserve funds for exposures to corporate exposures, a bank shall not apply AIRB approach in respect of any general corporate exposure to person/entity/institution belonging to group of persons/entities/institutions of which consolidated revenue reported in annual financial statements exceed R15bn.
For the purpose of using the risk-weight function specified in reg 23(11)(d)(ii)(A), IRB banks must apply multiplication factor of 1.25 to all exposures to financial institutions, provided total assets of said financial institution are greater than or equal to R1.2trn.
Banks that adopted FIRB approach for measuring exposures to credit risk are directed to calculate effective maturity of exposures in accordance with reg 23(13)(d)(ii)(B).
In the case of a securitisation scheme with early amortisation features, the bank interprets retail exposure to mean any exposure to a person of less than R12.5mn.
Unsecured wholesale funding provided by non-financial small business customers only include small business customers if total aggregate amount of funding raised from a customer and associates/affiliates, on gross consolidated basis, is less than R12.5mn.
Bank shall classify and treat deposits by small business customers as retail deposits, provided aggregate liabilities raised from small business customer less than R12.5mn.
Effectiveness
Interested persons are invited to submit comments on the directive by May 3, 2023.
Sep. 2023 Directive Issued
On Sep. 29, 2023, RSA CB issued Directive D8/2023 re threshold amounts re revised standardized, internal ratings-based approaches for credit risk, liquidity risk framework
Respective requirements specified in D8/2023, effective from proposed implementation dates specified in Guidance Note 3/2023 (G3-2023), see #179806, i.e. on Jul. 1, 2025.
