Risk Based Capital Adequacy Requirements for Banks Incorporated in Singapore

Monetary Authority of Singapore
MAS Notice 637
20 September 2023
Last revised on 9 October 2025*
NOTICE TO BANKS
BANKING ACT, CAP 19
NOTICE ON RISK BASED CAPITAL ADEQUACY REQUIREMENTS FOR BANKS INCORPORATED IN SINGAPORE CONTENTS
Part I Introduction ……………………………………………………………………… 1-1
Part II Definitions ………………………………………………………………………… 2-1
Annex 2A Glossary ………………………………………………………………………………………………………… 2-2
Part III Scope of Application …………………………………………………………… 3-1
Division 1 Capital Adequacy Ratio Requirements ………………………………… 3-1 Division 2 Leverage Ratio Requirements ……………………………………………… 3-2
Part IV Capital Adequacy Ratios and Leverage Ratio ……………………………4-1
Division 1 Capital Adequacy Ratios ……………………………………………………… 4-1 Division 2 Leverage Ratio …………………………………………………………………… 4-12
Annex 4A Denominators for CET1 CAR, Tier 1 CAR and Total CAR ………………………… 4-13
Annex 4B Determination of Country or Jurisdiction for a Private Sector Credit
Exposure ………………………………………………………………………………………………………4-14
Annex 4C Calculation of the Leverage Ratio ……………………………………………………………… 4-17
Annex 4D CCF for Off-balance Sheet Items Other Than Securitisation Items
under the Leverage Ratio …………………………………………………………………………… 4-37
Part V Output Floor …………………………………………………………………………5-1
Part VI Definition of Capital ………………………………………………………………6-1
Division 1 Common Equity Tier 1 Capital ……………………………………………. 6-1 Division 2 Additional Tier 1 Capital ………………………………………………………6-16 Division 3 Tier 2 Capital ……………………………………………………………………… 6-29

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Division 4 Submission Requirements ………………………………………………… 6-44
Annex 6A Minority Interest and Other Capital Issued by Fully Consolidated
Subsidiaries Held by Third Party Investors – An Illustrative Example ………6-46
Annex 6B Requirements to Ensure Loss Absorbency at the Point of Non-Viability … 6-49
Annex 6C Standards for a Prudent Valuation Framework ………………………………………… 6-52
Part VII Credit Risk ………………………………………………………………………… 7-1
Division 1 Overview of Credit RWA Calculation …………………………………… 7-1 Sub-division 1 Introduction Sub-division 2 Exposures Included in the Calculation of SA(CR) RWA and IRBA RWA Sub-division 3 Calculation of SA(CR) RWA Sub-division 4 Calculation of IRBA RWA Sub-division 5 Calculation of CCR-SA RWA and CCR-IRBA RWA Sub-division 6 Calculation of Credit RWA for Equity Investments in Funds Sub-division 7 Calculation of Credit RWA for Securitisation Exposures Division 2 Measurement of Exposures …………………………………………………7-11 Sub-division 1 Introduction Sub-division 2 Measurement of E or EAD for On-balance Sheet Assets Sub-division 3 Measurement of E or EAD for Off-balance Sheet Items Other than CCR Exposures Sub-division 4 Recognition of Eligible Financial Collateral for On-balance Sheet Assets and Off-balance Sheet Items Other than Exposures in Equity Investments in Funds, Securitisation Exposures, and CCR Exposures Sub-division 5 Recognition of Eligible Financial Collateral for Securitisation Exposures Sub-division 6 Measurement of E or EAD for Pre-settlement Counterparty Exposures Arising from OTC Derivative Transactions, Exchange-traded Derivative Transactions and Long Settlement Transactions, Other than Transactions Covered by a Qualifying Cross-Product Netting Agreement Sub-division 7 Measurement of E or EAD for Pre-Settlement Counterparty Exposures Arising from SFTs, Other than Transactions Covered by a Qualifying Cross-Product Netting Agreement Sub-division 8 Measurement of E or EAD for Pre-Settlement Counterparty Exposures Arising from OTC Derivative Transactions, Long Settlement Transactions and SFTs Covered by a Qualifying Cross-Product Netting Agreement Sub-division 9 Exceptions to the Measurement of E or EAD Division 3 SA(CR) ………………………………………………………………………………… 7-23 Sub-division 1 Categorisation of SA(CR) Exposures Sub-division 2 Credit Quality Grades and External Credit Assessments Sub-division 3 Risk Weights Sub-division 4 Treatment of Credit Protection and Recognition of Eligible Financial Collateral Sub-division 5 Recognised ECAIs Division 4 IRBA …………………………………………………………………………………… 7-71 Sub-division 1 Application to Adopt the IRBA

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Sub-division 2 Submission of Information for Supervisory Validation Prior to IRBA Adoption Sub-division 3 Approval to Adopt the IRBA Sub-division 4 IRBA Rollout Sub-division 5 Categorisation of IRBA Exposures Sub-division 6 Calculation of Capital Requirements, K, under the IRBA Sub-division 7 Calculation of Capital Requirements, K, and Determination of Risk Weights, RWslot, for Exposures in the SL Asset Sub-Class and HVCRE Asset Sub-Class under the IRBA Sub-division 8 Calculation of K for IRBA Wholesale Asset Class Sub-division 9 Calculation of K for IRBA Retail Asset Class Sub-division 10 Calculation of K for Eligible Purchased Receivables Asset Class Sub-division 11 Treatment of Credit Protection Sub-division 12 Calculation of K for Defaulted Assets Sub-division 13 Supervisory Slotting Criteria Sub-division 14 Calculation of EL Amount Division 5 Equity Investments in Funds …………………………………………… 7-117 Sub-division 1 Introduction Sub-division 2 Look-Through Approach (LTA) Sub-division 3 Mandate-Based Approach (MBA) Sub-division 4 Fall-Back Approach (FBA) Sub-division 5 Treatment of Funds that Invest in Other Funds Sub-division 6 Partial Use of an Approach Division 6 Securitisation …………………………………………………………………… 7-124 Sub-division 1 Introduction Sub-division 2 Requirements for the Recognition of Risk Transference Sub-division 3 Treatment of Securitisation Exposures Sub-division 4 Internal Ratings-Based Approach (SEC-IRBA) Sub-division 5 External Ratings-Based Approach (SEC-ERBA) Sub-division 6 Internal Assessment Approach (SEC-IAA) Sub-division 7 Standardised Approach (SEC-SA) Sub-division 8 Treatment of Mixed Pools Sub-division 9 Treatment of Resecuritisation Exposures Sub-division 10 Treatment of Securitisations of NPL Securitisations Sub-division 11 Treatment of Simple, Transparent and Comparable (STC) Securitisations Sub-division 12 Implicit Support Sub-division 13 Treatment of Credit Risk Mitigation Division 7 Exposures to Central Counterparties ……………………………… 7-154 Sub-division 1 Overview Sub-division 2 CCP Trade Exposures to Qualifying CCPs Sub-division 3 Default Fund Exposures Division 8 UST Exposures ………………………………………………………………… 7-167 Sub-division 1 Overview Sub-division 2 Calculation of Credit RWA for UST Exposures Arising from Unsettled DvP Transactions Sub-division 3 Calculation of Credit RWA for UST Exposures Arising from Unsettled Non-DvP Transactions
Annex 7A Qualifying On-Balance Sheet Netting Agreements ………………………………… 7-173

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Annex 7B CCF for Off-Balance Sheet Items Other Than CCR Exposures ……………… 7-179
Annex 7C CCF for Off-Balance Sheet Securitisation Exposures ……………………………… 7-181
Annex 7D Standardised Approach for Counterparty Credit Risk (SA-CCR) …………… 7-182
Annex 7E CCR Internal Models Method …………………………………………………………………… 7-204
Annex 7F Calculation of EAD* using VaR Models for SFTs ……………………………………… 7-224
Annex 7G Qualifying Bilateral Netting Agreements and Qualifying Cross-Product
Netting Agreements ………………………………………………………………………………… 7-226
Annex 7H CRM …………………………………………………………………………………………………………… 7-234
Annex 7I Treatment for Specific Types of Credit Protection Bought ……………………… 7-256
Annex 7J Calculation of E* or EAD* under the FC(CA) for Collateralised
Transactions Other than OTC Derivative Transactions and Long Settlement Transactions ………………………………………………………………………… 7-259
Annex 7K Illustration on the Application of the SFT Haircut Floors on a
Hypothetical Portfolio ……………………………………………………………………………… 7-265
Annex 7L Definition of Default under the SA(CR) and IRBA …………………………………… 7-266
Annex 7M Credit Quality Grades ……………………………………………………………………………… 7-271
Annex 7N Recognised ECAIs …………………………………………………………………………………… 7-273
Annex 7O Qualifying MDBs ……………………………………………………………………………………… 7-274
Annex 7P Qualifying Repo-style Transactions ………………………………………………………… 7-275
Annex 7Q Core Market Participants ………………………………………………………………………… 7-276
Annex 7R Definition of SL Asset Sub-Class and HVCRE Asset Sub-Class ……………… 7-277
Annex 7S Guidelines on Supervisory Rating Categories for SL Asset
Sub-class and HVCRE Asset Sub-class …………………………………………………… 7-284
Annex 7T Use of Top-Down Approach for Purchased Receivables ………………………… 7-306
Annex 7U Definition of IRBA Parameters ………………………………………………………………… 7-312
Annex 7V Calculation of M ………………………………………………………………………………………… 7-314
Annex 7W Minimum Requirements on Information and Data Used for Deriving
Estimates of IRBA Parameters ………………………………………………………………… 7-319
Annex 7X Minimum Requirements for IRBA …………………………………………………………… 7-321
Annex 7Y Guidelines on IRBA Rollout Parameters ………………………………………………… 7-359
Annex 7Z Guidelines on LGD and EAD Estimates for all Asset Classes ………………… 7-362
Annex 7AA Illustrative Risk Weights Calculated under the IRBA ……………………………… 7-368
Annex 7AB Illustration on the Calculation of Credit Risk-weighted Exposure
Amounts for Equity Investments in Funds ……………………………………………… 7-370
Annex 7AC Requirements for Exclusion of Securitised Exposures from the
Calculation of Credit RWA ………………………………………………………………………… 7-374
Annex 7AD Operational Requirements for use of SEC-ERBA …………………………………… 7-381
Annex 7AE Criteria for Simple, Transparent and Comparable (STC) Securitisations
that are not ABCP Programmes (STC Criteria) ……………………………………… 7-384
Annex 7AF Criteria for Simple, Transparent and Comparable (STC) Securitisations
that are ABCP Programmes (Short-Term STC Criteria) ………………………… 7-396
Annex 7AG Illustration on the Recognition of Dilution Risk when applying the
SEC-IRBA to Securitisation Exposures …………………………………………………… 7-417
Part VIII Market Risk ………………………………………………………………………… 8-1
Division 1 Overview of Market RWA Calculation ………………………………… 8-1 Sub-division 1 Introduction Sub-division 2 Scope of Application for SA(MR), IMA and SSA(MR) Sub-division 3 Transitional Arrangements Sub-division 4 Methods of Measuring Market Risks Sub-division 5 Determination of the Trading Book Sub-division 6 Definition of Trading Desk and Trading Desk Structure Division 2 SA(MR) …………………………………………………………………………………8-20 Sub-division 1 General Requirements

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Sub-division 2 SBM – Calculation of Capital Requirement Sub-division 3 SBM – Risk Factor Definitions Sub-division 4 SBM – Sensitivity Definitions Sub-division 5 SBM – Risk Factors and Sensitivities for Instruments with Multiple Constituents and Equity Investments in Funds Sub-division 6 SBM – Definition of Delta Risk Buckets, Risk Weights and Correlations Sub-division 7 SBM – Definition of Vega Risk Buckets, Risk Weights and Correlations Sub-division 8 SBM – Definition of Curvature Risk Buckets, Risk Weights and Correlations Sub-division 9 Default Risk Capital Sub-division 10 Residual Risk Add-on (RRAO) Division 3 IMA ……………………………………………………………………………………… 8-91 Sub-division 1 General Requirements and Application Process to Adopt the IMA Sub-division 2 Qualitative Standards Sub-division 3 Model Requirements Sub-division 4 Backtesting and P&L Attribution Test Requirements Sub-division 5 Calculation of IMA Capital Requirements Sub-division 6 Transitional Arrangements Division 4 SSA(MR) …………………………………………………………………………… 8-151 Sub-division 1 General Requirements Sub-division 2 Interest Rate Risk Sub-division 3 Equity Risk Sub-division 4 Foreign Exchange Risk Sub-division 5 Commodity Risk Sub-division 6 Treatment of Options Division 5 Regulatory CVA ………………………………………………………………… 8-178 Sub-division 1 Overview of Calculation of CVA RWA Sub-division 2 BA-CVA Sub-division 3 SA-CVA
Annex 8A Illustrative Examples of the Components Used to Calculate the Gross
JTD Position ……………………………………………………………………………………………… 8-228
Annex 8B Applications of the Requirements to Determine Risk Factor
Modellability ……………………………………………………………………………………………… 8-229
Annex 8C Derivation of Notional Positions for Interest Rate-related Derivatives ……8-231
Annex 8D Treatment of Credit Derivatives in the Trading Book ………………………………8-233
Annex 8E Applicable Risk Charges or Matching Factors for Calculation of Specific
Risk and General Market Risk Capital Requirements for Interest Rate Risk under the SSA(MR) ……………………………………………………………………………8-239
Annex 8F Illustration on the Calculation of the General Market Risk Capital
Requirement for Interest Rate Risk under the Maturity Method …………… 8-244
Annex 8G Derivation of Notional Positions for Equity Derivatives ……………………………8-247
Annex 8H Qualifying Equity Indices ………………………………………………………………………… 8-249
Annex 8I Derivation of Notional Positions for Foreign Currency and Gold
Derivatives …………………………………………………………………………………………………8-250
Annex 8J Derivation of Notional Positions for Commodity Derivatives ………………… 8-251
Annex 8K Illustration on the Calculation of the Market Risk Capital Requirement
for Commodity Risk under the Maturity Ladder Approach ………………………8-253
Annex 8L Illustration on the Calculation of the Market Risk Capital Requirement
for Options under the Simplified Approach ………………………………………………8-254
Annex 8M Illustration on the Calculation of the Market Risk Capital Requirement
for Options under the Delta-plus Approach ………………………………………………8-255

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Annex 8N Illustrations on Determining Delta-weighted Positions for Interest Rate
Options ……………………………………………………………………………………………………… 8-257
Annex 8O Example of Matrices for Analysing Option Portfolios under the
Scenario Approach …………………………………………………………………………………… 8-258
Part IX Operational Risk ………………………………………………………………… 9-1
Division 1 SA(OR) ………………………………………………………………………………… 9-1 Sub-division 1 Calculation of Operational Risk Capital Requirement Sub-division 2 Criteria on Internal Loss Data Identification, Collection and Treatment
Annex 9A Definitions of BI Components …………………………………………………………………… 9-14
Annex 9B Operational Loss Event Type Classification ……………………………………………… 9-18
Part X Supervisory Review Process …………………………………………………10-1
Division 1 Introduction ………………………………………………………………………… 10-1 Division 2 ICAAP …………………………………………………………………………………. 10-2 Sub-division 1 General Requirements Sub-division 2 Board and Senior Management Oversight Sub-division 3 Comprehensive Risk Assessment Sub-division 4 Sound Capital Assessment Sub-division 5 Independent Review Division 3 Supervisory Review …………………………………………………………… 10-8
Annex 10A Specific issues in ICAAP for Main Risk Categories and Topics ……………… 10-10
Annex 10B Standardised Approach for Interest Rate Risk in the
Banking Book (SA(IR)) …………………………………………………………………………… 10-52
Annex 10C Standardised Interest Rate Shock Scenarios ………………………………………… 10-66
Annex 10D Guidelines on IRRBB ………………………………………………………………………………… 10-71
Part XI Public Disclosure Requirements …………………………………………. 11-1
Division 1 Introduction ……………………………………………………………………… 11-1 Division 2 General Requirements ……………………………………………………… 11-2 Sub-division 1 Scope of Application Sub-division 2 Frequency and Timing of Disclosures Sub-division 3 Location and Form of Disclosures Sub-division 4 Omissions Sub-division 5 Disclosure Policy Sub-division 6 Transitional Arrangements Division 3 Specific Disclosure Requirements ……………………………………… 11-7 Sub-division 1 Introduction Sub-division 2 Overview of Key Prudential Metrics, Risk Management and RWA Sub-division 3 Linkages between Financial Statements and Regulatory Exposures Sub-division 4 Credit Risk Sub-division 5 Counterparty Credit Risk Sub-division 6 Securitisation

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Sub-division 7 Market Risk
Sub-division 8 Operational Risk
Sub-division 9 Interest Rate Risk in the Banking Book Sub-division 10 Remuneration Sub-division 11 Composition of Capital Sub-division 12 Leverage Ratio Sub-division 13 Macroprudential Supervisory Measures Sub-division 14 Asset Encumbrance Sub-division 15 Credit Valuation Adjustment Risk
Annex 11A Composition of Capital …………………………………………………………………………… 11-141
Annex 11B Reconciliation of Regulatory Capital to Balance Sheet ………………………… 11-150
Annex 11C Main Features of Regulatory Capital Instruments ………………………………… 11-153
Annex 11D Leverage Ratio Summary Comparison Table ………………………………………… 11-158
Annex 11E Leverage Ratio Common Disclosure Template ……………………………………… 11-161
Part XII Reporting Schedules ……………………………………………………………12-1
Division 1 Introduction ………………………………………………………………………… 12-1 Division 2 Scope and Frequency of Reporting …………………………………… 12-9 Division 3 Transitional Arrangements ………………………………………………. 12-10
Annex 12A Capital Adequacy Reporting Schedules
Annex 12B Credit Risk Reporting Schedules
Annex 12C Market Risk Reporting Schedules
Annex 12D Market Risk Reporting Schedules – Transitional Arrangements
Annex 12E Operational Risk Reporting Schedules
Annex 12F Other Reporting Schedules
Annex 12G Written Confirmation from CFO

Monetary Authority of Singapore 1-1
PART I: INTRODUCTION
1.1.1 This Notice is issued pursuant to section 10(2), section 10A(1), section 10B(1),
and section 65(2) of the Banking Act and applies to all Reporting Banks.
1.1.2 This Notice establishes the capital adequacy ratios and leverage ratio
requirements for a Reporting Bank and the methodologies a Reporting Bank must use for calculating these ratios (“Pillar 1”)1 .
1.1.3 This Notice also sets out the requirements in respect of the internal capital
adequacy assessment process of a Reporting Bank under the supervisory review process (“Pillar 2”).
1.1.4 This Notice also specifies the minimum disclosure requirements for a Reporting
Bank in relation to its capital adequacy, with a view to enhancing market discipline (“Pillar 3”).
1.1.5 This Notice takes effect on 1 July 2024.
1 While this Notice provides a range of approaches for calculating regulatory capital requirements, a Reporting Bank should adopt the approaches that are commensurate with the complexity and sophistication of its business and operations.

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PART II: DEFINITIONS
2.1.1 The expressions used in this Notice are defined in the Glossary at Annex 2A.
2.1.2 The expressions used in this Notice shall, except where defined in this Notice or
where the context otherwise requires, have the same meanings as in the Banking Act 1970.
2.1.3 Any reference to a paragraph, Sub-division, Division, Part or Annex is a
reference to a paragraph, Sub-division, Division, Part or Annex in this Notice unless otherwise specified.

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Annex 2A
GLOSSARY
α in relation to the CCR internal models method, means the alpha factor set out in paragraph 2.9 of Annex 7E; ABCP conduit means a bankruptcy-remote SPE which issues commercial paper under an ABCP programme; ABCP programme or asset-backed commercial paper programme means a programme under which commercial paper is issued by a bankruptcy-remote SPE to third party investors with an original maturity of one year or less and is backed by assets or other exposures held by the bankruptcy-remote SPE; ABCP programme investor means the holder of – (a) commercial paper issued under an ABCP programme; or (b) any type of exposure to an ABCP conduit representing a financing liability of the ABCP conduit2; ABCP programme sponsor means an entity which – (a) purchases or advises or causes an SPE to purchase the exposures of a third party, which are then used to back commercial papers issued under an ABCP programme; or (b) places ABCP securities into the market, or provides liquidity or credit enhancements to the ABCP; ABCP transaction means a transaction3 in which an ABCP conduit acquires – (a) in the case where the law governing the transaction recognises the acquisition of beneficial interests, a beneficial interest in an asset or pool of assets; or (b) in the case where the law governing the transaction does not recognise the acquisition of beneficial interests, an interest in an asset or pool of assets; ABCP transaction seller means a party that – (a) has done either of the following:
(i) concluded in its capacity as original lender the original agreement that created any of the following obligations or potential obligations:
(A) a credit claim of an obligor;
(B) a receivable of an obligor;
(ii) purchased any of the obligations or potential obligations referred to in sub-paragraph (a)(i) from one or more original lenders that was or were parties to one or more original agreements that created the obligation or potential obligation; and 2 For example, loans. 3 This may include a direct asset purchase, an acquisition of undivided interest in a replenishing pool of assets, or a secured loan.

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(b) has transferred the assets arising from the obligation or potential obligation referred to in sub-paragraph (a)(i), or passed on an interest in such assets, to an ABCP conduit through an ABCP transaction; Accounting Loss Allowance means the loss allowance for expected credit losses on the selected non-credit-impaired exposures4 set out in Appendix C of MAS Notice 612, that is determined and recognised in accordance with the impairment measurement requirements under FRS 109; Accounting Standards has the same meaning as in section 4(1) of the Companies Act 1967; accredited investor has the same meaning as in section 4A of the Securities and Futures Act 2001; [MAS Notice 637 (Amendment) 2025] ADC means land acquisition, development and construction; affiliate means – (a) an entity that has a beneficial interest in 20% or more of the total number of ordinary shares or controls 20% or more of the voting power in the Reporting Bank; (b) an entity in which the Reporting Bank has a beneficial interest in 20% or more of the total number of ordinary shares or controls 20% or more of the voting power in the entity; or (c) an entity in which a related corporation of the Reporting Bank has a beneficial interest in 20% or more of the number of ordinary shares or controls 20% or more of the voting power in the entity; A-IRBA or advanced IRBA in relation to the IRBA wholesale asset class, means the approach under the IRBA under which a Reporting Bank uses its own estimates of PD, LGD and EAD; APL or actual P&L in relation to the IMA, means the P&L derived from the daily P&L process; approved exchange has the same meaning as in section 2 of the Securities and Futures Act 2001; asset class means – (a) in relation to the SA(CR), one of the classes of exposures set out in Sub-division 1 of Division 3 of Part VII; and (b) in relation to the IRBA, one of the classes of exposures set out in Sub-division 5 of Division 4 of Part VII; 4 To avoid doubt, “non-credit-impaired exposures” means credit exposures that do not fall within the definition of “credit-impaired financial asset” under FRS 109.

Monetary Authority of Singapore 2-4 associate has the same meaning as “associate” under the Accounting Standards; AT1 Capital or Additional Tier 1 Capital means – (a) in relation to a Reporting Bank, the sum of items set out in paragraph 6.2.1; and (b) in relation to a subsidiary of a Reporting Bank, the sum of items set out in paragraph 6.2.1, where a reference to “Reporting Bank” shall be construed as a reference to “the subsidiary of the Reporting Bank”; AT1 capital instrument means a capital instrument which complies with the requirements set out in paragraph 6.2.2; automatic interest rate option means an option arising from a standalone instrument5, or explicitly embedded within the contractual terms of an instrument6 where the option holder may be reasonably expected to exercise the option if it is in the option holder’s financial interest to do so; BA-CVA or basic approach for credit valuation adjustment means the approach for calculating capital requirements for CVA risk set out in Sub-division 2 of Division 5 of Part VIII; bank means – (a) any company which holds a valid licence under section 7 or 79 of the Banking Act7; or (b) any entity established or incorporated in a foreign country or jurisdiction which is approved, licensed, registered or otherwise regulated by a bank regulatory agency of the foreign country or jurisdiction to carry on banking business under the laws of the foreign country or jurisdiction8; Banking Act means Banking Act 1970; banking book means all on-balance sheet and off-balance sheet exposures of a Reporting Bank other than its trading book positions; banking group means the Reporting Bank and its banking group entities; banking group entity means any subsidiary or any other entity which is treated as part of the Reporting Bank's group of entities according to the Accounting Standards; bank regulatory agency in relation to a foreign country or jurisdiction, means an authority in the foreign country or jurisdiction exercising any function that 5 For example, an exchange-traded or OTC option contract. 6 For example, a capped rate loan. 7 Including the branches and offices of the company located outside Singapore. 8 Including the branches and offices of the entity located outside Singapore.

Monetary Authority of Singapore 2-5 corresponds to a regulatory function of the Authority under the Banking Act; basis risk in relation to market risk, means the risk that prices of instruments in a hedge are not perfectly correlated with each other; BCBS means the Basel Committee on Banking Supervision; behavioural interest rate option means an option embedded implicitly or within the terms of financial contracts, such that changes in interest rates may effect a change in the behaviour of the client; BI in relation to the SA(OR), means business indicator; business day means any calendar day other than – (a) a public holiday in the country or jurisdiction concerned; (b) a bank holiday in the country or jurisdiction concerned; or (c) a day on which the financial markets are not open for business in the country or jurisdiction concerned; cash pooling arrangement means an arrangement involving treasury products whereby a Reporting Bank combines the credit and debit balances of all participating accounts into a single account balance to facilitate cash management, liquidity management or both; CCF means credit conversion factor; CCP or central counterparty means a clearing facility that interposes itself between counterparties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer and thereby ensuring the future performance of open contracts, through novation, an open offer system or other legally binding arrangements; CCP RWA means the risk-weighted assets for exposures to CCPs arising from CCR exposures and default fund exposures, calculated in accordance with Division 7 of Part VII; CCP trade exposures means current exposure, including the variation margin due to a clearing member but not yet received, potential future exposure and initial margin of a clearing member or a client of a clearing member arising from any OTC derivative transaction, exchangetraded derivative transaction, long settlement transaction or SFT; CCR or counterparty credit risk means the risk that the counterparty to a transaction or portfolio of transactions could default before the final settlement of the transaction’s cash flows where there is a bilateral risk of loss, giving rise to an economic loss to the Reporting Bank if the transaction or portfolio of transactions with the counterparty has a positive economic value at the time of default, and vice versa;

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CCR exposure means any pre-settlement counterparty exposure arising from OTC derivative transactions, exchange-traded derivative transactions, long settlement transactions and SFTs; CCR-IRBA RWA means the risk-weighted assets for any CCR exposure (other than any exposure to a CCP arising from a CCR exposure), calculated in accordance with the IRBA; CCR internal models method means the method for calculating E or EAD, whichever is applicable, for any CCR exposure set out in Annex 7E; CCR-SA RWA means the risk-weighted assets for any CCR exposure (other than any exposure to a CCP arising from a CCR exposure), calculated in accordance with the SA(CR); CDS means credit default swap; CET1 Capital or Common Equity Tier 1 Capital means – (a) in relation to a Reporting Bank, the sum of the items set out in paragraph 6.1.1; and (b) in relation to a subsidiary of a Reporting Bank, the sum of items set out in paragraph 6.1.1, where a reference to “Reporting Bank” shall be construed as a reference to “the subsidiary of the Reporting Bank”; CET1 capital instrument means a capital instrument which complies with the requirements set out in paragraph 6.1.2; CET1 CAR in relation to a Reporting Bank, means Common Equity Tier 1 capital adequacy ratio, calculated in accordance with paragraph 4.1.1; CF means commodities finance; clean-up call means an option which permits the securitisation exposures to be called before all of the underlying exposures or securitisation exposures have been repaid. In the case of a traditional securitisation, this is generally accomplished by repurchasing the remaining securitisation exposures once the underlying exposures or the outstanding securities issued have fallen below some specified level. In the case of a synthetic securitisation, the cleanup call may take the form of a clause that extinguishes the credit protection; clearing member means a member of, or a direct participant in, a CCP that is entitled to enter into a transaction with the CCP, regardless of whether it enters into trades with a CCP for its own hedging, investment or speculative purposes or whether it also enters into trades as a financial intermediary between the CCP and other

Monetary Authority of Singapore 2-7 market participants. Where a CCP has a link to a second CCP, that second CCP must be treated as a clearing member of the CCP; client in relation to a clearing member, means a party to a transaction with a CCP through either the clearing member acting as a financial intermediary, or the clearing member guaranteeing the performance of the client to the CCP; client sub-account in relation to a clearing member, means an account for – (a) transactions that it enters into with a client acting as a financial intermediary between the client and the CCP; and (b) collateral posted by such a client, that is held separately from the clearing member’s proprietary transactions and collateral; closed-end fund has the same meaning as in section 2 of the Securities and Futures Act 2001; CM or capital measure has the same meaning as Tier 1 Capital; collective investment scheme has the same meaning as in section 2 of the Securities and Futures Act 2001; commitment means any contractual arrangement that has been offered by a Reporting Bank and accepted by a counterparty, to extend credit, purchase assets or issue credit substitutes, and includes – (a) any such arrangement that can be unconditionally cancelled by a Reporting Bank at any time without prior notice to the counterparty; and (b) any such arrangement that can be cancelled by a Reporting Bank if the counterparty fails to meet conditions set out in the contractual arrangement, including conditions that must be met by the counterparty prior to any initial or subsequent drawdown arrangement, but, in relation to the leverage ratio requirements and credit risk capital requirements, excludes any arrangement that meets all of the following conditions:
(i) the Reporting Bank receives no fees or commissions, including administrative fees, to establish or maintain the arrangement9; (ii) the counterparty is required to apply to the Reporting Bank for the initial and each subsequent drawdown; (iii) the Reporting Bank has full authority, regardless of the fulfilment by the counterparty of the conditions set out in the 9 To avoid doubt – (a) fees or commissions charged only at the time of each drawdown; and (b) fees or commissions collected by the Reporting Bank on behalf of third-party service providers (e.g. external valuation fees, external legal fees, insurance fees), do not disqualify a Reporting Bank from meeting this condition.

Monetary Authority of Singapore 2-8 facility documentation, over the execution of each drawdown under the arrangement; (iv) the Reporting Bank’s decision on the execution of each drawdown under the arrangement is only made after the Reporting Bank assesses the creditworthiness of the counterparty immediately prior to drawdown, and for this purpose, the Reporting Bank may rely on its routine credit assessments of the counterparty, supplemented by a confirmation provided by a party independent of the functions responsible for originating exposures that no material adverse information has arisen subsequent to the most recent credit assessment that would affect the counterparty’s creditworthiness immediately prior to drawdown; (v) the counterparty is a corporation, partnership, limited liability partnership, sole proprietorship, trust or fund, which is closely monitored by the Reporting Bank on an ongoing basis, and the exposure to the counterparty falls into one of the following asset classes or asset sub-classes:
(A) in the case of an SA(CR) exposure, the corporate asset class or real estate asset class; (B) in the case of an IRBA exposure, the general corporate asset sub-class, corporate small business asset subclass, or SL asset sub-class; (vi) the arrangement is not in respect of a loan that is to be drawn down in a number of tranches; core market participant means any of the entities listed in Annex 7Q; corporate exposure means – (a) in relation to the SA(CR), an exposure that falls within paragraph 7.3.1(g); and (b) in relation to the IRBA, an exposure that falls within paragraph 7.4.42(a), (b), (e) or (f); corporation means any body corporate formed or incorporated or existing in Singapore or outside Singapore and includes any foreign company; cover pool in relation to an issuance of covered bonds, means a pool of assets that are – (a) legally or beneficially owned or legally and beneficially owned by a bank, a mortgage institution or an SPV; (b) held by a bank or a mortgage institution as trustee, or a replacement trustee, on behalf of an SPV; or (c) both, for the purposes of securing the payment of – (i) the liabilities to the holders of the covered bonds; (ii) any liabilities arising from the enforcement of the rights of the holders of the covered bonds; and

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(iii) any liabilities to third party service providers appointed for the operation and administration of the covered bonds programme; covered bond (a) in the case of paragraph 3.1.5 and paragraph 1.4 of
Annex 4C, has the same meaning as in MAS Notice 648; and
(b) in all other cases, means any bond, note or other debenture issued by a bank or a mortgage institution, whether directly or through an SPV, and that meets all of the following requirements:
(i) the bond, note or debenture must be subject to a law, whether in Singapore or outside Singapore, that protects all holders of the bond, note or debenture; (ii) the proceeds derived from the issuance of the bond, note or debenture must be invested in conformity with the law mentioned in sub-paragraph (b)(i) in assets that form a cover pool, where – (A) the aggregate value of the assets can satisfy all claims attached to the bond, note or debenture, during the duration of the validity of the bond, note or debenture; and (B) in the event that the issuer defaults on the bond, note or debenture, the assets will be used on a priority basis for the reimbursement of the principal, and the payment of the accrued interest, to the holder of the bond, note or debenture; (iii) a holder of the bond, note or debenture may enforce his rights against, and recover any payment owed to him by, the issuer of the bond, note or debenture; CPF means the Central Provident Fund Board constituted under
section 3 of the Central Provident Fund Act 1953;
CPR means conditional prepayment rate;
CPSS means Committee on Payment and Settlement Systems; CRE means commercial real estate; credit derivative means any contract which transfers the credit risk of a reference obligation or set of reference obligations from the protection buyer to the protection seller, such that the protection seller has an exposure to the reference obligation(s); credit enhancement means a contractual arrangement in which a Reporting Bank or other entity retains or assumes a securitisation exposure that, in substance, provides some degree of credit protection to other parties to the securitisation; credit RWA means the risk-weighted assets for credit risk, determined in the manner set out in paragraph 7.1.1;

Monetary Authority of Singapore 2-10 credit-enhancing interest only strip means an on-balance sheet asset that represents a valuation of cash flows related to future margin income and is subordinated to the other securitisation exposures in a securitisation; CRM or credit risk mitigation means any technique used by a Reporting Bank to reduce the credit risk associated with any exposure which the Reporting Bank holds; cross-product netting means the netting between a Reporting Bank and a counterparty of pre-settlement counterparty exposures arising from transactions involving 2 or more of the following product categories:
(a) OTC derivative transaction;
(b) repo, reverse repo, securities or commodities lending transaction and securities or commodities borrowing transaction; (c) margin lending transaction; CSR in relation to market risk, means credit spread risk; CSRBB means credit spread risk in the banking book; CTP or correlation trading portfolio means a portfolio that incorporates – (a) securitisation exposures10 that meet all of the following criteria:
(i) the positions are not either of the following:
(A) resecuritisation positions;
(B) derivatives of securitisation exposures that do not provide a pro rata share in the proceeds of a securitisation tranche11; (ii) all reference instruments are single-name products, including single-name credit derivatives and traded indices based on single-name products, for which a liquid two-way market exists; (iii) the positions do not reference an underlying exposure that would fall within the scope of the regulatory retail asset class, other retail asset class, or real estate asset class, as set out in paragraph 7.3.1(i), (j) and (k), respectively, under the SA(CR); (iv) the positions do not reference a claim on a special purpose entity, where the special purpose entity-issued instrument is backed, directly or indirectly, by a position that would itself be excluded if held by a Reporting Bank directly; and 10 To avoid doubt, this includes n-th-to-default credit derivatives. 11 Examples of derivatives of securitisation exposures that do not provide a pro rata share in the proceeds of a securitisation tranche are options on a securitisation exposure or a leveraged securitisation exposure.

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(b) exposures that are not securitisation exposures and that hedge the securitisation exposures described in subparagraph (a), and for the purposes of this definition, a liquid two-way market is deemed to exist where there are independent bona fide offers to buy and sell so that a price reasonably related to the last sales price or current bona fide competitive bid and offer quotations can be determined within one day and trades settled at such price within a relatively short time conforming to trade custom; currency mismatch means a situation where an exposure and the collateral or credit protection provided in support of it are denominated in different currencies; current exposure means the larger of zero, or the current market value of a transaction or portfolio of transactions within a netting set with a counterparty that would be lost upon the immediate default of the counterparty, assuming no recovery on the value of those transactions in a bankruptcy or insolvency; curvature risk in relation to market risk and CVA risk, means the additional potential loss beyond delta risk due to a change in a risk factor for an instrument with optionality; CVA or credit valuation adjustment in relation to a Reporting Bank, means an adjustment to the midmarket valuation of the portfolio of trades with a counterparty, which reflects the market value of credit risk, and may include either the market value of the credit risk of the counterparty or the market value of the credit risk of both the Reporting Bank and the counterparty; CVA loss means CVA which has already been recognised by a Reporting Bank as an incurred write-down; CVA portfolio has the meaning in paragraph 8.5.2(b); CVA risk means the risk of losses arising from changes in – (a) CVA in response to changes in counterparty credit spreads; and (b) risk factors that affect values of derivative transactions or SFTs; CVA RWA means the risk-weighted assets for regulatory CVA calculated in accordance with Division 5 of Part VIII; D-SIB means domestic systemically important bank; default in relation to the SA(CR) or the IRBA, has the meaning in
Annex 7L;

Monetary Authority of Singapore 2-12 default fund12 means a fund established by a CCP, comprising the pre-funded or unfunded contributions of a CCP and its clearing members towards, or underwriting of, a CCP’s mutualised loss sharing arrangements, and includes initial margins posted to a CCP in the case where the CCP uses the initial margins to mutualise losses among clearing members; default fund exposure means exposure arising from contributions of a Reporting Bank to a default fund of a CCP; delta risk in relation to market risk and CVA risk, means the linear estimate of the potential loss resulting from the change in value of an instrument due to a change in value of a risk factor13; dilution means any reduction in a receivable amount through cash or noncash credits to an obligor of the receivable; distribution of exposures means the forecast of the probability distribution of market values that is generated by setting forecast instances of negative net market values equal to zero; distribution of market values means the forecast of the probability distribution of net market values of transactions within a netting set for some future date (i.e. the forecasting horizon) given the realised market value of those transactions up to the present time; diversification in relation to market risk and CVA risk, means the reduction in risk when positions in instruments are aggregated due to the positions in different instruments not being perfectly correlated with one another; DRC in relation to the market risk, means default risk capital; DvP or deliveryversus-payment transaction means a transaction where cash is paid simultaneously with the receipt of the corresponding receivable of securities, foreign exchange instruments or commodities, or conversely, the delivery of securities, foreign exchange instruments or commodities simultaneously with the receipt of the corresponding cash payment, and includes a payment-versus-payment transaction; EAD or exposure at the time of default has the meaning in paragraph 4.1 of Annex 7U; 12 A default fund may also be known as clearing deposits, guaranty fund deposits or any other name. The substance of a CCP’s mutualised loss sharing arrangements, rather than the description given by a CCP to its mutualised loss sharing arrangements, is determinative of the status of the arrangement as a default fund. 13 For example, a change in the price of an equity or commodity, or a change in an interest rate, credit spread or foreign exchange rate.

Monetary Authority of Singapore 2-13 early amortisation provision means a contractual provision that, once triggered, accelerates the reduction of the investor’s interests in underlying exposures of a securitisation in which one or more underlying exposures represent, directly or indirectly, current or future draws on a revolving loan14, and allows investors to be paid out prior to the originally stated maturity of the securities issued; early redemption risk means the risk of early withdrawal for fixed rate term deposits; ECAI means an external credit assessment institution, and includes all entities trading under the trade name of that external credit assessment institution; EE or expected exposure means the average of the distribution of exposures at any particular future date before the longest maturity transaction in the netting set matures; effective EE means as at a specific date – (a) the maximum EE that occurs at that date or any prior date; or (b) the greater of the expected exposure at that date, or the effective EE at the previous date; effective EPE means the weighted average over time of effective EEs over the first year, or if all the contracts within the netting set mature before one year, over the time period of the longest maturity contract in the netting set, where the weights are the proportion that an individual effective EE represents of the entire time interval; EL or expected loss in relation to the IRBA, means the ratio of the amount expected to be lost on an exposure arising from a potential default of a counterparty, dilution or both, over a one-year period to the amount outstanding at default; EL amount has the meaning in Sub-division 14 of Division 4 of Part VII; eligible CRE means any CRE held as collateral where the requirements set out in Annex 7H are satisfied; eligible credit protection means any guarantee (or other instrument as the Authority may allow) or credit derivative where the requirements set out in
Annex 7H are satisfied;
eligible CVA hedge means a CVA hedge that meets the eligibility criteria specified in paragraph 8.5.15 for the BA-CVA and paragraph 8.5.28 for the SA-CVA, whichever is applicable; 14 Examples of revolving loans include credit card exposures, home equity lines of credit, commercial lines of credit, and other lines of credit.

Monetary Authority of Singapore 2-14 eligible financial collateral means – (a) in relation to the FC(SA), one or more types of collateral set out in paragraphs 2.2 and 2.10 of Annex 7H; and (b) in relation to the FC(CA) or the F-IRBA, one or more types of collateral set out in paragraphs 2.8 and 2.10 of Annex 7H, where the requirements set out in Annex 7H are satisfied; eligible IRBA collateral means one or more types of collateral set out in paragraph 2.11 of Annex 7H where the requirements set out in that Annex are satisfied; eligible physical collateral means any physical collateral where the requirements set out in
Annex 7H are satisfied;
eligible protection provider means any of the following, excluding an individual:
(a) in relation to the SA(CR), SEC-IRBA, SEC-ERBA, SEC-IAA or SEC-SA, a guarantor or protection seller which is – (i) a central government, a central bank, the Bank for International Settlements, the International Monetary Fund, the European Central Bank, the European Union, the European Stability Mechanism or the European Financial Stability Facility; (ii) an MDB; (iii) a PSE; (iv) an entity which would fall within the bank asset class in paragraph 7.3.1(e); (v) a qualifying CCP; (vi) an entity holding a capital markets services licence under the Securities and Futures Act 2001, other than entities that carry on business in providing credit rating services as defined under section 2(1) of the Securities and Futures Act 2001 and venture capital fund managers as defined under regulation 14(5) of the Securities and Futures (Licensing and Conduct of Business) Regulations; (vii) an entity licensed to carry on insurance business under the Insurance Act 1966; (viii) a securities firm in a foreign country or jurisdiction or an entity licensed to carry on insurance business in a foreign country or jurisdiction, where such entities are subject to prudential standards and supervision consistent with international norms; or (ix) in the case where the credit protection is – (A) not provided for a securitisation exposure, any other entity, including a related corporation of the counterparty to which the Reporting Bank has an exposure and for which the credit protection is provided, with an external credit assessment by a recognised ECAI; or (B) provided for a securitisation exposure, any other entity other than an SPE, and including a related corporation of the counterparty to which the

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Reporting Bank has an exposure and for which the credit protection is provided, which has a credit quality grade of “2” or better as set out in Table 7M-1 at the time the credit protection was provided, and a credit quality grade of “3” or better as set out in Table 7M-1 during the period of recognition of the effects of CRM; (b) in relation to the F-IRBA or the supervisory slotting criteria, a guarantor or protection seller which is – (i) any entity in sub-paragraphs (a)(i) to (a)(ix); or (ii) any entity which is internally rated; (c) in relation to market risk, a guarantor or protection seller which is – (i) any entity in sub-paragraphs (a)(i) to (a)(ix); or (ii) any entity which has an existing internal rating under the F-IRBA or the A-IRBA; eligible purchased receivables exposure in relation to the IRBA, means any exposure that falls within paragraph 7.4.56; eligible receivables means any financial receivables held as collateral where the requirements set out in Annex 7H are satisfied; eligible RRE means any RRE held as collateral where the requirements set out in Annex 7H are satisfied; Eligible Total Capital in relation to a Reporting Bank or subsidiary of the Reporting Bank, means the sum of Tier 1 Capital and Tier 2 Capital; EM or exposure measure means the exposure amount in respect of an item as calculated in accordance with Annex 4C; EPE or expected positive exposure means the weighted average over time of EEs over the first year, or if all the contracts within the netting set mature before one year, over the time period of the longest maturity contract in the netting set, where the weights are the proportion that an individual EE represents of the entire time interval; equity exposure has the meaning given to it in paragraph 7.3.9; ES or expected shortfall means the average of all potential losses exceeding the VaR at a particular confidence level; EVE means the economic value of equity; ∆EVE means change in economic value of equity under an interest rate stress or shock scenario, calculated by subtracting the economic value of equity under the interest rate stress or shock scenario from the economic value of equity under the current interest rates;

Monetary Authority of Singapore 2-16 excess spread means any gross finance charge collections and other income received by the trust or SPE after deducting certificate interest, servicing fees, charge-offs, and other senior trust or SPE expenses; external CVA hedge in relation to a Reporting Bank, means a CVA hedge with a counterparty external to the Reporting Bank; facility grade in relation to wholesale exposures, means a risk category within the facility rating scale of a rating system to which exposures are assigned on the basis of a specified and distinct set of rating criteria and from which estimates of LGD are derived; FC(CA) or financial collateral comprehensive approach means the method for calculating the effects of CRM arising from eligible financial collateral set out in Annex 7J; FC(SA) or financial collateral simple approach means the method for calculating the effects of CRM arising from eligible financial collateral set out in Sub-division 4 of Division 3 of Part VII; finance company means a company licensed under section 6 of the Finance Companies Act 1967 to carry on financing business; financial asset has the same meaning as in FRS 32; financial institution means any of the following:
(a) an entity, whether established or incorporated in Singapore or in a foreign country or jurisdiction, the principal activity of which is to carry on business in one or more of the following activities:
(i) banking business;
(ii) deposit-taking business;
(iii) insurance business;
(iv) dealing or trading in securities, exchange-traded derivative transactions or OTC derivative transactions, whether as an agent or on a proprietary basis; (v) foreign exchange trading and leveraged foreign exchange trading, whether as an agent or on a proprietary basis; (vi) advising on corporate finance; (vii) fund management; (viii) real estate investment trust management; (ix) securities financing; (x) providing custodial services; (xi) operating an exchange, trading system or market; (xii) providing central counterparty services;

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(xiii) operating a payment system, securities depository, securities settlement system or trade repository; (xiv) providing financial advisory services; (xv) insurance broking; (xvi) trust business; (xvii) money broking; (xviii) money-changing business; (xix) remittance business; (xx) lending; (xxi) factoring; (xxii) leasing; (xxiii) provision of credit enhancements; (xxiv) securitisation; (xxv) such other business that the Authority may specify from time-to-time; (b) a holding company which holds as a subsidiary, a bank or an insurance subsidiary; (c) a CCP; (d) any entity that is approved, licensed, registered or otherwise regulated by the Authority; financial instrument means any contract between 2 entities that gives rise to both a financial asset of one entity and a financial liability or equity of another entity, and includes both non-derivative and derivative instruments; financial liability has the same meaning as in FRS 32; financial year has the same meaning as in section 4(1) of the Companies Act 1967; F-IRBA or foundation IRBA in relation to the IRBA wholesale asset class, means the approach under the IRBA under which a Reporting Bank uses its own estimates of PD but not its own estimates of LGD and EAD; foreign company has the same meaning as in section 4(1) of the Companies Act 1967; FRA means a forward rate agreement; FRS 32 means the Singapore Financial Reporting Standard 32; FRS 105 means the Singapore Financial Reporting Standard 105; FRS 109 means the Singapore Financial Reporting Standard 109; FRS 110 means the Singapore Financial Reporting Standard 110; FSB means the Financial Stability Board;

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FSB TLAC Term
Sheet means the FSB’s TLAC principles and term sheet set out at the FSB’s website; funded credit protection means a CRM where the reduction of the credit risk of an exposure of a Reporting Bank is derived from the right of the Reporting Bank, in the event of the default of a counterparty or on the occurrence of other specified credit events relating to the counterparty, to liquidate, to obtain transfer or appropriation of, or to retain, certain assets or amounts; FX means foreign exchange; G-SIB means global systemically important bank, as identified by the FSB; gain-on-sale means any increase in the equity of a Reporting Bank which is an originator resulting from the sale of underlying exposures in a securitisation; general allowance means loss allowance for credit exposures that do not fall within the definition of “credit-impaired financial asset” under FRS 109, and includes loss allowances maintained by a Reporting Bank in excess of the Accounting Loss Allowance; general wrong-way risk means the risk that arises when the probability of default of counterparties is positively correlated with general market risk factors; GIRR in relation to market risk, means general interest rate risk; gross loss in relation to the SA(OR), means a loss arising from an operational loss event before recoveries of any type; HDB means the Housing and Development Board established under
section 3 of the Housing and Development Act 1959;
hedge in relation to market risk and CVA risk, means the counterbalancing of risks from exposures to long and short risk positions in instruments whose price movements are correlated with each other; hedging set means a group of transactions within a single netting set within which full or partial offsetting is recognised for the purpose of calculating the potential future exposure under the SA-CCR; higher level client in relation to a multi-level client structure, means the financial institution providing clearing services; holding period in relation to collateralised transactions, means the period of time over which the exposure or collateral values are assumed to move before a Reporting Bank is able to close out the transactions;

Monetary Authority of Singapore 2-19 house sub-account in relation to a clearing member, means an account for (a) transactions conducted for its proprietary purposes and (b) collateral posted by the clearing member for such transactions, and that account is held separately from transactions conducted by the clearing member acting as a financial intermediary between the CCP and its client and collateral posted by such clients, in client sub-accounts; HPL or hypothetical P&L in relation to the IMA, means the daily P&L produced by revaluing the positions held at the end of the previous trading day, using the market data at the end of the current trading day; HVCRE means high-volatility commercial real estate; IA means the internal audit function or an equally independent function of a Reporting Bank; ICA or independent collateral amount means the amount of collateral other than variation margin posted by the counterparty that the Reporting Bank may seize upon default of the counterparty, which does not change in response to the value of transactions it secures, and includes the Independent Amount parameter defined in standard industry documentation15; ICAAP means internal capital adequacy assessment process; ILM in relation to the SA(OR), means internal loss multiplier; IMA or internal models approach means the approach for calculating market risk capital requirements set out in Division 3 of Part VIII or, if the reference is to any regulatory requirements of, or administered by, a bank regulatory agency other than the Authority, the equivalent under those requirements; IMA exposure means any exposure for which a Reporting Bank is using the IMA to calculate its market risk capital requirement; IMA portfolio means a portfolio of risk positions held in trading desks that are in-scope of the IMA; implicit support in relation to a securitisation, means any support that a Reporting Bank provides to a securitisation in excess of its predetermined contractual obligations; IMS means internal measurement system; 15 For example, the 1992 (Multicurrency-Cross Border) Master Agreement and the 2002 Master Agreement published by the International Swaps & Derivatives Association, Inc. (ISDA Master Agreement). The ISDA Master Agreement includes the ISDA Credit Support Annexes: the 1994 Credit Support Annex (Security Interest – New York Law), or, as applicable, the 1995 Credit Support Annex (Transfer – English Law) and the 1995 Credit Support Deed (Security Interest – English Law).

Monetary Authority of Singapore 2-20 indirect client means a financial institution which is not a direct clearing member, but provides clearing services as a client of a clearing member or a client of a client of a clearing member; initial margin in relation to exposures to a CCP, means collateral of a clearing member or a client of a clearing member posted to the CCP to mitigate the potential future exposure of the CCP to the clearing member arising from the possible future change in value of their transactions, but must not include any contribution to a CCP for mutualised loss sharing arrangements. This includes collateral in excess of the minimum amount required, provided the CCP or clearing member may prevent the clearing member or the client of a clearing member from withdrawing such excess collateral; institutional investor has the same meaning as in section 4A of the Securities and Futures Act 2001; [MAS Notice 637 (Amendment) 2025] instrument means a financial instrument or a contract giving rise to a position in foreign exchange or commodities, where commodities includes non-physical goods16; insurance business means the business of assuming risk or undertaking liability under policies, and of – (a) receiving proposals for policies; (b) issuing policies; or (c) collecting or receiving premiums on policies, and but does not include the operation, otherwise than for profit, of a scheme or arrangement relating to service in particular offices or employments, and having for its object or one of its objects to make provision in respect of persons serving therein against future retirement or partial retirement, or against future termination of service through death or disability, or against similar matters. For the purpose of this definition, a policy includes any contract of insurance whether or not embodied in or evidenced by an instrument in the form of a policy;17 insurance subsidiary means – (a) a subsidiary which carries on insurance business as an insurer; (b) a subsidiary which is – (i) a holding company of the subsidiary referred to in subparagraph (a); and (ii) subject to capital adequacy requirements set out in a direction or notice issued by the Authority under the Financial Holding Companies Act 2013; or (c) a subsidiary of the holding company referred to in subparagraph (b), which is included by the holding company in 16 An example is electric power. 17 To avoid doubt, insurance business includes reinsurance business.

Monetary Authority of Singapore 2-21 its computation of capital adequacy requirements set out in a direction or notice issued by the Authority under the Financial Holding Companies Act 2013; internal CVA hedge in relation to a Reporting Bank, means a hedge for CVA risk between the CVA portfolio and a market risk portfolio under the trading book of the Reporting Bank; internal loss data in relation to the SA(OR), means the internal data on operational risk losses; internal risk transfer means an internal written record of a transfer of risk within the banking book, between the banking book and the trading book or between different trading desks in the trading book;

internationally active bank means a bank incorporated in Singapore which has been notified by the Authority that the Authority considers it to be internationally active, taking into consideration whether the bank has one or more banking group entity established or incorporated in a foreign country or jurisdiction which is approved, licensed, registered or otherwise regulated by a bank regulatory agency of the foreign country or jurisdiction to carry on banking business under the laws of the foreign country or jurisdiction, and whether the banking group entity’s operations are significant in that foreign country or jurisdiction; IOSCO means the International Organisation of Securities Commissions; IPRE means income-producing real estate; IRB pool or internal ratingsbased pool in relation to a securitisation, means a pool of underlying exposures to a securitisation for which a Reporting Bank has approval from the Authority under Sub-division 3 of Division 4 of
Part VII, and sufficient information, to calculate capital
requirements using the IRBA for all underlying exposures; IRBA or internal ratings-based approach means the approach for calculating credit risk-weighted exposure amounts set out in Division 4 of Part VII or, if the reference is to any regulatory requirements of, or administered by, a bank regulatory agency other than the Authority, the equivalent under those requirements; IRBA adoption date means the date from which a Reporting Bank begins using the IRBA for calculating any part of its regulatory capital requirements; IRBA asset class means any one of the classes of exposures belonging to the IRBA wholesale asset class, the IRBA retail asset class or the IRBA eligible purchased receivables asset class;

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IRBA asset subclass in relation to the IRBA, means any one of the sub-classes of exposures set out in paragraphs 7.4.42, 7.4.50 and 7.4.56; IRBA eligible purchased receivables asset class in relation to the IRBA, means the class of exposures comprising eligible purchased receivables exposures; IRBA exposure means any exposure for which a Reporting Bank is using the IRBA to calculate its credit risk-weighted exposure amount; IRBA for the IRBA retail asset class means the approach under the IRBA for the IRBA retail asset class under which a Reporting Bank uses its own estimates of PD, LGD and EAD; IRBA parameters means PD, LGD and EAD; IRBA retail asset class in relation to the IRBA, means the class of exposures comprising retail exposures; IRBA wholesale asset class in relation to the IRBA, means the class of exposures comprising wholesale exposures; IRRBB means interest rate risk in the banking book; ISDA means the International Swaps and Derivatives Association; IT means information technology; JTC means the Jurong Town Corporation established under section 3 of the Jurong Town Corporation Act 1968; [MAS Notice 637 (Amendment) 2024] JTD or jump to default in relation to market risk, means an event where a credit exposure defaults before the market has factored its increased default risk into its current credit spreads; JTD position in relation to market risk, means the loss that could be incurred from a JTD; legal event means an event that results in a loss due to legal risk; legal risk means the risk of loss resulting from exposures to fines, penalties, damages or sums payable resulting from criminal prosecution, regulatory actions, supervisory actions, civil claims, settlements or similar actions; LGD or loss given default in relation to the IRBA and the SEC-IRBA, has the meaning in paragraph 3.1 of Annex 7U;

Monetary Authority of Singapore 2-23 liquidity horizon in relation to market risk, means the time assumed to be required to exit or hedge a risk position without materially affecting market prices in stressed market conditions; long settlement transaction means any transaction where a counterparty undertakes to deliver a security, a commodity or a foreign exchange amount against cash, other financial instruments or commodities, or vice versa, at a settlement or delivery date which is contractually specified as more than the lower of the market standard for this particular transaction type and 5 business days after the date on which the Reporting Bank enters into the transaction; look-through approach in relation to the SA(MR), means an approach in which the Reporting Bank determines the capital requirements for a position that has underlying instruments18 as if the positions in underlying instruments were held directly by the Reporting Bank; loss in relation to the IRBA, means any economic loss on an exposure as described in Annex 7U; lower level client in relation to a multi-level client structure, means the financial institution clearing through – (a) a client of a clearing member; or (b) a client of a client of a clearing member; LR or leverage ratio in relation to a Reporting Bank, means the percentage calculated in accordance with paragraph 1.1 of Annex 4C; M or effective maturity in relation to the IRBA or the CCR internal models method, means the maturity of an exposure, determined in the manner set out in
Annex 7V;
main index means an index which –
(a) comprises equities listed on any approved exchange or overseas exchange; and (b) is referenced by futures or options traded on any approved exchange or overseas exchange; major stake company in relation to a Reporting Bank, means any company in which the Reporting Bank is deemed, by virtue of section 32(7) of the Banking Act, to hold a major stake; margin agreement means any contractual agreement or any terms and conditions of an agreement, where one counterparty has to supply variation margin to a second counterparty when an exposure of that second counterparty to the first counterparty exceeds a specified level; margin lending transaction means a transaction in which a Reporting Bank extends credit in connection with the purchase, sale, carrying or trading of 18 A position that has underlying instruments could, for example, be an index instrument, multi-underlying option, or an equity investment in a fund.

Monetary Authority of Singapore 2-24 securities, where the loan amount is collateralised by securities whose value is generally greater than the amount of the loan, and does not include other loans that happen to be collateralised by securities; margin period of risk means the time period from the last exchange of collateral covering a netting set of transactions with a defaulting counterparty until the netting set of transactions with the counterparty is closed out and the resulting market risk is rehedged, where the last exchange of collateral refers to the market observation date corresponding to the last margin call to the counterparty for posting of the required collateral prior to its assumed default. To avoid doubt, the settlement process does not influence the length of the margin period of risk; [MAS Notice 637 (Amendment) 2024] margin threshold means the largest amount of an exposure that remains outstanding until one party has the right to call for variation margin; mark-to-model in relation to market risk, means any valuation which has to be benchmarked, extrapolated or otherwise calculated from a market input; market risk means the risk of losses arising from movements in market prices; market RWA means the risk-weighted assets for market risks, determined in the manner set out in paragraph 8.1.1; maturity mismatch means a situation where the residual maturity of the credit risk mitigant is less than the residual maturity of the underlying credit exposure; MDB or multilateral development bank means an institution which – (a) is created by 2 or more countries or jurisdictions; (b) provides financing and professional advice, for economic and social development projects; and (c) has its own independent legal and operational status; mixed pool in relation to a securitisation, means a pool of underlying exposures to a securitisation for which a Reporting Bank has approval from the Authority under Sub-division 3 of Division 4 of
Part VII, and sufficient information, to calculate capital
requirements using the IRBA for some, but not all, underlying exposures; modellable risk factor in relation to the IMA, means a risk factor that has passed the risk factor eligibility test in accordance with paragraph 8.3.111 and meets the requirements for the modellability of risk factors pursuant to paragraph 8.3.127;

Monetary Authority of Singapore 2-25 mortgage institution in relation to covered bond exposures, means any financial institution that provides a loan to an obligor for the purchase of any real estate, where the real estate is used as a security for that loan; multi-level client structure means any structure in which clearing services are provided by a financial institution which is an indirect client; multi-underlying instrument means an instrument that references multiple underlying instruments; n-th-to-default credit derivative means a contract where – (a) the payoff is based on the n-th asset to default in a basket of underlying reference instruments; and (b) the transaction terminates and is settled once the n-th default occurs; net loss in relation to the SA(OR), means the loss arising from an operational loss event after taking into account the impact of recoveries; netting means bilateral netting, including – (a) netting by novation, where obligations between 2 counterparties to deliver a given currency on a given value date under a transaction are automatically amalgamated with all other obligations under other transactions to deliver on the same currency and value date, thereby extinguishing former transactions with a single legally binding new transaction; (b) close-out netting, where some or all of the ongoing transactions between 2 counterparties are terminated due to the default of either counterparty or upon the occurrence of a termination event as defined in the netting agreement, whereupon the values of such transactions are combined and reduced to a single payable sum; and (c) in relation to a qualifying on-balance sheet netting agreement, the reduction of the loans and deposits of a Reporting Bank covered by the qualifying on-balance sheet netting agreement to a net sum that is to be paid to a counterparty or received by the Reporting Bank from a counterparty, but does not include payments netting which is designed to reduce the operational cost of daily settlements, where the gross obligations of the counterparties are not in any way affected; netting agreement means any agreement which effects netting between 2 counterparties, or any other arrangement to effect netting, which does not contain a walkaway clause;

Monetary Authority of Singapore 2-26 netting set means a group of transactions between 2 counterparties that is subject to a qualifying bilateral netting agreement or a qualifying cross-product netting agreement, as the case may be; any transaction which is not subject to a qualifying bilateral netting agreement or a qualifying cross-product netting agreement must be deemed a netting set;

NICA or net independent collateral amount19 means the amount of segregated and unsegregated collateral posted by the counterparty to the Reporting Bank, less the unsegregated collateral20 posted by the Reporting Bank to the counterparty, and in relation to the Independent Amount defined in standard industry documentation, takes into account the differential of Independent Amount required for the Reporting Bank minus Independent Amount required for the counterparty; NII means net interest income; ∆NII means change in net interest income under an interest rate stress or shock scenario, calculated by subtracting the net interest income under the interest rate stress or shock scenario from the net interest income under the current interest rates; NMDs or nonmaturity deposits means non-maturing deposits, which are liabilities of a Reporting Bank that have no contractually agreed maturity date and where a depositor is free to withdraw the deposits any time; NMRF or nonmodellable risk factor in relation to the IMA, means a risk factor that has not passed the risk factor eligibility test in accordance with paragraph 8.3.111 or does not meet the requirements for the modellability of risk factors pursuant to paragraph 8.3.127; nominated approach means the approach used by a Reporting Bank to calculate its regulatory capital requirements for a particular type of risk under this Notice, other than one used solely to calculate the output floor as specified in paragraph 5.1.1; non-DvP or nondelivery-versuspayment transaction means a transaction where cash is paid without receipt of the corresponding receivable of securities, foreign exchange instruments or commodities, or conversely, the delivery of securities, foreign exchange instruments or commodities without the receipt of the corresponding cash payment; non-performing loan securitisation or NPL securitisation means a securitisation that fully meets the criteria set out in paragraph 7.6.85; 19 NICA represents the amount of collateral that a Reporting Bank may use to offset its exposure on the default of the counterparty. 20 To avoid doubt, the collateral posted by the Reporting Bank to the counterparty, held in a segregated and bankruptcy remote manner, is not deducted in the calculation of NICA.

Monetary Authority of Singapore 2-27
NOP means net open foreign exchange positions; obligor grade in relation to wholesale exposures, means a risk category within the obligor rating scale of a rating system to which obligors are assigned on the basis of a specified and distinct set of rating criteria and from which estimates of PD are derived; OF means object finance; offsetting transaction means the transaction leg between a clearing member and the CCP when the clearing member acts on behalf of a client, for example, when a clearing member clears or novates a client’s trade; one-sided CVA means a credit valuation adjustment that reflects the market value of the credit risk of the counterparty to a Reporting Bank, but does not reflect the market value of the credit risk of the Reporting Bank to the counterparty; operating entity means an entity that is conducting business with the intention of earning a profit in its own right; operational loss event means an event that results in loss due to operational risk; operational risk means the risk of loss resulting from – (a) inadequate or failed internal processes; (b) actions or omissions of persons; (c) systems; or (d) external events, including legal risk, but does not include strategic or reputational risk; operational RWA means the risk-weighted assets for operational risk, determined in the manner set out in paragraph 9.1.1; originator means – (a) an entity which, either itself or through related entities, directly or indirectly, creates the exposure being securitised21; or (b) any entity which sponsors a securitisation, i.e. purchases or advises or causes an SPE to purchase the exposures of a third party, which are then used in a securitisation (to avoid doubt, selling credit protection such that the entity or the SPE has a long position in the credit risk of the obligor is equivalent to 21 Where an entity lends to an SPE with a view to enabling that SPE to make loans which are then used in a securitisation, the entity will generally be deemed to be acting as an originator.

Monetary Authority of Singapore 2-28 purchasing exposures)22, and includes an ABCP programme sponsor; OTC means over-the-counter; OTC derivative transaction means a derivative contract, including an exchange rate contract, interest rate contract, equity contract, precious metal or other commodity contract or credit derivative contract, which is not traded on an exchange; overseas exchange has the same meaning as in section 2 of the Securities and Futures Act 2001; P&L means profit and loss; parameterisation process means the process by which a Reporting Bank derives estimates of IRBA parameters as set out in Section 5 of Annex 7X; PD or probability of default in relation to the IRBA, has the meaning in paragraphs 2.1 and
2.2 of Annex 7U;
peak exposure means a high percentile (typically 95% or 99%) of the distribution of exposures at any particular future date before the maturity date of the longest transaction in the netting set; PE/VC investments has the same meaning as defined in MAS Notice 630; PF means project finance; PLA in relation to the IMA, means P&L attribution; predominantly banking DFHC has the same meaning as in regulation 3 of the Financial Holding Companies Regulations; pricing model means a model that is used to determine the value of an instrument as a function of pricing parameters or to determine the change in the value of an instrument as a function of risk factors23; PSE or public sector entity means – 22 An entity which advises or causes an SPE to purchase the exposures of a third party, which are then used in a securitisation will generally not be deemed to be acting as an originator if – (a) the entity has not advised or caused the SPE to purchase any exposures which are then used in a securitisation before the date of issue of securities effecting the transfer of credit risk of those exposures to the investors in the securitisation; (b) the entity will not be liable for any losses incurred by the SPE arising from the exposures (to avoid doubt, the entity may still be liable for losses arising from a breach of its fiduciary duties); and (c) the entity does not undertake to achieve a minimum performance for the exposures. 23 A pricing model may be the combination of several calculation steps, for example, a valuation technique to first calculate a price, followed by valuation adjustments for risks that are not taken into consideration in the first step and calculated using a model.

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(a) a regional government or local authority that is able to exercise one or more functions of the central government at the regional or local level; (b) an administrative body or non-commercial undertaking responsible to, or owned by, a central government, regional government or local authority, which performs regulatory or non-commercial functions; (c) a statutory board in Singapore (other than the Authority); or (d) a town council in Singapore established pursuant to the Town Councils Act 1988; QRRE means qualifying revolving retail exposures; qualifying bilateral netting agreement means a bilateral netting agreement where the requirements set out in Annex 7G are complied with; qualifying CCP means a CCP that meets the requirements of paragraph 7.7.3; qualifying crossproduct netting agreement means a cross-product netting agreement where the requirements set out in Annex 7G are complied with; qualifying MDB means an MDB listed in Annex 7O; qualifying onbalance sheet netting agreement means a netting agreement covering loans and deposits between a Reporting Bank and a counterparty where the requirements set out in Annex 7A are complied with; qualifying repostyle transaction means a repo-style transaction where the requirements set out in
Annex 7P are complied with;
rating system in relation to a class of exposures under the IRBA, means all of the methods, processes, controls, data collection and IT systems that support the assessment of credit risk, the assignment of exposures to grades or pools (internal risk ratings), and the parameterisation process for that class of exposures; real estate means an immovable property that is land, including agricultural land and forest, or anything treated as attached to land, in particular buildings, in contrast to being treated as movable or personal property; real price in relation to the risk factor eligibility test, under the IMA, has the same meaning as in paragraph 8.3.109; recognised ECAI means an ECAI recognised by the Authority pursuant to paragraph
7.3.126 and listed in Annex 7N;
recovery in relation to the SA(OR), means an independent occurrence, related to the original operational loss event, separate in time, in

Monetary Authority of Singapore 2-30 which funds or inflows of economic benefits are received from a third party, and does not include receivables24; reference obligation means any obligation specified under a credit derivative contract used for the purposes of either determining cash settlement value or the deliverable obligation; regular way purchase or sale has the same meaning as “regular way purchase or sale” under FRS 109; regulatory capital means capital which is used to meet regulatory requirements; regulatory CRE exposure in relation to the SA(CR), means an exposure in the regulatory real estate asset sub-class that is not a regulatory RRE exposure; regulatory CVA in relation to a Reporting Bank, means the adjustment to the valuations of derivative transactions or SFTs due to a potential default of a counterparty, specified at the level of each counterparty, reflecting the market value of credit risk25; regulatory loss allowance means loss allowance held in excess of Accounting Loss Allowance, maintained in a non-distributable regulatory loss allowance reserve account mentioned in paragraph 6.3.8 of MAS Notice 612, including any loss allowance held in excess of the minimum level of loss allowance mentioned in paragraph 6.3.7 of MAS Notice 612; regulatory RRE exposure in relation to the SA(CR), means an exposure in the regulatory real estate asset sub-class that is – (a) secured by a real estate that has the nature of a housing and satisfies all applicable laws and regulations enabling the real estate to be occupied for housing purposes; or (b) secured by a real estate under construction, including land upon which real estate would be constructed, where the real estate being constructed has the nature of a housing, and is expected to satisfy all applicable laws and regulations enabling the real estate to be occupied for housing purposes; repo means a repurchase transaction; repo-style transaction means a transaction comprising any of the following:
(a) a repo;
(b) a reverse repo;
(c) a securities lending transaction;
(d) a securities borrowing transaction,
24 Examples of recoveries are payments received from insurers, repayments received from perpetrators of fraud, and recoveries of misdirected transfers. 25 Regulatory CVA may differ from CVA used for accounting purposes as follows:
(a) regulatory CVA excludes the effect of a Reporting Bank’s own default; (b) constraints imposed on the calculations of regulatory CVA reflect best practices in the industry for the calculations of CVA used for accounting purposes.

Monetary Authority of Singapore 2-31 where the value of the transaction depends on market valuation and the transaction is often subject to margin agreements; Reporting Bank means a bank incorporated in Singapore; resecuritisation exposure means a securitisation exposure in which the risk associated with an underlying pool of exposures is tranched and at least one of the underlying exposures is a securitisation exposure, and – (a) includes an exposure to one or more resecuritisation exposures; and (b) excludes an exposure resulting from retranching of a securitisation exposure, if the Reporting Bank is able to demonstrate to the satisfaction of the Authority that the cash flows to and from the Reporting Bank could be replicated in all circumstances and conditions by an exposure to the securitisation of a pool of assets that contains no securitisation exposures; retail exposure in relation to the IRBA, means any exposure which falls within paragraph 7.4.50; retail investor in Singapore means an investor in Singapore that is not an accredited investor or institutional investor; [MAS Notice 637 (Amendment) 2025] reverse repo means a reverse repurchase transaction; revolving loan means a credit facility where the obligor is allowed to drawdown, repay and re-draw the credit facility advanced to it, and has the flexibility to decide how often to withdraw from the credit facility and at what time intervals, and includes credit facilities that allow prepayments and subsequent re-draws of those prepayments; risk bucket in relation to the SA(MR), means a defined group of risk factors with similar characteristics; risk charge in relation to the SSA(MR), means the percentage assigned to that position to derive the capital requirement; risk class (a) in relation to the SA(MR), means any of the following classes of risks, that is used by the Reporting Bank as the basis for calculating market risk capital requirements:
(i) general interest rate risk;
(ii) credit spread risk (non-securitisation); (iii) credit spread risk (securitisation: non-correlation trading portfolio); (iv) credit spread risk (securitisation: correlation trading portfolio); (v) foreign exchange risk; (vi) equity risk;

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(vii) commodity risk; and
(b) in relation to the SA-CVA, means any of the following classes of risk, that is used by the Reporting Bank as the basis for calculating CVA risk capital requirements:
(i) interest rate risk;
(ii) foreign exchange risk;
(iii) counterparty credit spread risk;
(iv) reference credit spread risk;
(v) equity risk;
(vi) commodity risk; risk factor in relation to market risk and CVA risk, means a principal determinant of the change in value of an instrument26; risk position in relation to market risk and CVA risk, means the portion of the current value of an instrument that is subject to losses due to changes in a risk factor27; risk weight in relation to an exposure, means a degree of risk expressed as a percentage assigned to that exposure; risk weight function in relation to the IRBA, means the formula for calculating credit risk-weighted exposure amounts using estimates of IRBA parameters; risk-free rate means the interest rate of a risk-free investment for a given maturity; RRAO in relation to the SA(MR), means residual risk add-on; RRE means residential real estate; RTPL or risktheoretical P&L in relation to the IMA, means the daily trading desk-level P&L that is predicted by the valuation engines in the trading desk risk management model using all risk factors used in the trading desk risk management model (including the NMRFs); RWA means risk-weighted assets; RWE means risk-weighted exposure; SA-CCR or standardised approach for means the method for calculating E or EAD, whichever is applicable, for any pre-settlement counterparty exposure arising from OTC derivative transactions or exchange-traded derivative transactions, or long settlement transactions set out in Annex 7D; 26 For example, an exchange rate or interest rate. 27 For example, a bond denominated in a currency different from a Reporting Bank’s reporting currency has risk positions in general interest rate risk, credit spread risk (non-securitisation) and foreign exchange risk, where the risk positions are the potential losses to the current value of the instrument that could occur due to a change in the relevant underlying risk factors, which are interest rates, credit spreads, or exchange rates).

Monetary Authority of Singapore 2-33 counterparty credit risk SA(CR) or standardised approach to credit risk means the approach for calculating credit risk-weighted exposure amounts set out in Division 3 of Part VII or, if the reference is to any regulatory requirements of, or administered by, a bank regulatory agency other than the Authority, the equivalent under those requirements; SA(CR) exposure means any exposure for which a Reporting Bank is using the SA(CR) to calculate its credit risk-weighted exposure amount; SA-CVA or standardised approach for credit valuation adjustment means the approach for calculating capital requirements for CVA risk set out in Sub-division 3 of Division 5 of Part VIII; SA(IR) means the standardised approach for calculating IRRBB as set out in Annex 10B; SA(MR) or standardised approach to market risk means the approach for calculating market risk capital requirements set out in Division 2 of Part VIII; SA(OR) or standardised approach to operational risk means the approach for calculating operational risk capital requirements set out in Division 1 of Part IX or, if the reference is to any regulatory requirements of, or administered by, a bank regulatory agency other than the Authority, the equivalent under those requirements; SA pool or standardised approach pool in relation to a securitisation, means a pool of underlying exposures to a securitisation for which a Reporting Bank – (a) does not have approval from the Authority to use the IRBA to calculate capital requirements for any underlying exposures or does not have sufficient information to calculate capital requirements using the IRBA for any underlying exposures; or (b) is prohibited by the Authority from treating the pool as a IRB pool or a mixed pool; SBM in relation to the SA(MR), means the sensitivities-based method; SEC-ERBA or securitisation external ratingsbased approach means the approach for calculating credit risk-weighted exposure amounts for securitisation exposures set out in Sub-division 5 of Division 6 of Part VII;

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SEC-IAA or securitisation internal assessment approach means the method for calculating credit risk-weighted exposure amounts for securitisation exposures set out in Sub-division 6 of Division 6 of Part VII; SEC-IRBA or securitisation internal ratingsbased approach means the approach for calculating credit risk-weighted exposure amounts for securitisation exposures set out in Sub-division 4 of Division 6 of Part VII; SEC-SA or securitisation standardised approach means the approach for calculating credit risk-weighted exposure amounts for securitisation exposures set out in Sub-division 7 of Division 6 of Part VII; securities means – (a) any securities as defined in section 2 of the Securities and Futures Act 2001; (b) any specified securities-based derivatives contracts as defined in section 2 of the Securities and Futures Act 2001; or (c) any units in a collective investment scheme; securities firm means – (a) any entity holding a capital markets services licence granted by the Authority under section 86 of the Securities and Futures Act 200128; or (b) any entity established or incorporated in a foreign country or jurisdiction which is approved, licensed, registered or otherwise regulated by a regulatory agency of the foreign country or jurisdiction to carry on business in capital markets services under the laws of the foreign country or jurisdiction29; securitisation means any transaction or scheme involving the tranching of credit risk associated with an exposure or a pool of exposures and which has all of the following characteristics:
(a) payments in the transaction or scheme depend on the performance of the exposure or pool of exposures; (b) the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme; (c) junior tranches can absorb losses without interrupting contractual payments to more senior tranches; securitisation exposure means any exposure to a securitisation, and includes – 28 Including the branches and offices of the entity located outside Singapore. 29 Including the branches and offices of the entity located outside Singapore.

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(a) any on-balance sheet exposure to securities issued pursuant to a securitisation30, regardless of whether it was retained by the originator at, or repurchased by the originator after, the origination of the securitisation; (b) any off-balance sheet exposure to a securitisation31; and (c) reserve accounts32 recorded as an asset by the originator; securitised exposure means an exposure, securitised by a Reporting Bank in its capacity as originator or ABCP programme sponsor, that forms an underlying exposure of a securitisation; segmentation in relation to retail exposures, means the process by which a Reporting Bank aggregates retail exposures into homogenous pools; senior securitisation exposure in relation to a securitisation, is an exposure to a senior securitisation tranche; senior securitisation tranche in relation to a securitisation, is a tranche that is effectively backed or secured by a first claim on the cash flows from the underlying exposures, and where a senior tranche is retranched, or partially hedged and not on a pro rata basis, is the new most senior tranche33; sensitivity in relation to market risk and CVA risk, means a Reporting Bank’s estimate of the change in value of an instrument due to a small change in one of its underlying risk factors34; servicer means any entity which carries out administrative functions relating to the cash flows of the underlying exposure or pool of exposures of a securitisation, including setting up and operating the mechanism for collecting payments of interest or principal derived from the underlying exposures and channeling these funds to the investors or the trustee representing them, customer service, cash management, maintenance of records and reporting duties; SES in relation to the IMA, means stressed expected shortfall; settlement date accounting has the same meaning as “settlement date accounting” under FRS 109; 30 For example, asset-backed securities, mortgage-backed securities or collateralised debt obligations. 31 For example, through credit enhancements, liquidity facilities, credit derivatives, tranched cover, interest rate swaps or currency swaps. 32 For example, cash collateral accounts. 33 While this generally includes only the most senior securities issued pursuant to a securitisation, in some instances there may be other claims that may be more senior in the cash flow waterfall (e.g. a swap claim) but may be disregarded for the purpose of determining which tranches are senior. To avoid doubt, different maturities of several senior tranches that share pro rata loss allocation have no effect on the seniority of these tranches, since they benefit from the same level of credit enhancement. 34 Delta risk and vega risk are examples of sensitivities.

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SFT means a securities or commodities financing transaction comprising any one of the following:
(a) a repo or a reverse repo;
(b) a securities or commodities lending transaction or securities or commodities borrowing transaction; (c) a margin lending transaction, for which the value of the transaction depends on market valuation and the transaction is often subject to margin agreements; SL means specialised lending; small business means a corporation, partnership, limited liability partnership, sole proprietorship, trust, or fund (including a collective investment scheme or closed-end fund), with reported annual revenue of less than or equal to S$100 million, as determined in accordance with paragraph 7.3.4; SPE or special purpose entity means a corporation, trust, or other entity established for a specific purpose, the activities of which are limited to those appropriate to accomplish that purpose, and the structure of which is intended to isolate the SPE from the credit risk of an originator or seller of exposures; specific allowance means loss allowance for credit exposures that fall within the definition of “credit-impaired financial asset” under FRS 109; specific wrong-way risk means the risk that arises when the exposure to a particular counterparty is positively correlated with the probability of default of the counterparty due to the nature of the transactions with that counterparty35; SPV or special purpose vehicle means any special purpose vehicle incorporated or established for the primary purpose of issuing covered bonds or holding the cover pool in relation to such covered bonds or both; SSA(MR) means the simplified standardised approach for calculating market risk capital requirements set out in Division 4 of Part VIII; structured note has the same meaning as in section 240AA(5) of the Securities and Futures Act 2001; subsidiary has the same meaning as in section 5 of the Companies Act 1967; supervisory slotting criteria in relation to the IRBA, means the method of calculating credit risk-weighted exposure amounts for exposures in the SL asset sub-class or the HVCRE asset sub-class in accordance with Subdivision 13 of Division 4 of Part VII and Annex 7S; 35 For example, a company writing put options on its own shares creates wrong-way risk exposures for the buyer that is specific to the counterparty.

Monetary Authority of Singapore 2-37 supervisory validation means the process by which the Authority examines the readiness of the Reporting Bank for adopting the IRBA, for the purposes of deciding whether to approve the Reporting Bank’s application to adopt the IRBA; synthetic securitisation means a structure with at least 2 different tranches which reflect different degrees of credit risk, where credit risk of an underlying exposure or pool of exposures is transferred, in whole or in part, through the use of funded or unfunded credit derivatives or guarantees; TDRR means term deposit redemption rate; TEM or total exposure measure means the amount as calculated in accordance with paragraph 2.3 of Annex 4C; TEP or total eligible provisions means the sum of all allowances, including specific allowances, partial write-offs, portfolio-specific general allowances36, which are attributed to credit exposures subject to the IRBA, and includes any discounts as referred to in paragraph 7.2.5 on defaulted assets, but excludes – (a) any allowances set aside against securitisation exposures, or underlying exposures to securitisations, which are held on the balance sheet of a Reporting Bank which is an originator; and (b) any CVA loss; the Board means – (a) in relation to a banking group entity, the board of directors, or a designated committee of the board of directors, of the banking group entity; and (b) in all other cases, the board of directors, or a designated committee of the board of directors, of the Reporting Bank; Tier 1 Capital in relation to a Reporting Bank or subsidiary of the Reporting Bank, means the sum of CET1 Capital and AT1 Capital; Tier 1 CAR in relation to a Reporting Bank, means Tier 1 capital adequacy ratio, calculated in accordance with paragraph 4.1.2; Tier 2 Capital means – (a) in relation to a Reporting Bank, the sum of the items set out in paragraph 6.3.1; and (b) in relation to a subsidiary of a Reporting Bank, the sum of items set out in paragraph 6.3.1, where a reference to “Reporting Bank” shall be construed as a reference to “the subsidiary of the Reporting Bank”; Tier 2 capital instrument means a capital instrument which complies with the requirements set out in paragraph 6.3.6; 36 For example, country or jurisdiction risk allowances or general allowances.

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TLAC or Total
Loss-absorbing
Capacity holding means TLAC-eligible instruments as set out in the FSB TLAC Term Sheet; Total CAR in relation to a Reporting Bank, means total capital adequacy ratio, calculated in accordance with paragraph 4.1.3; total EL amount means the amount calculated in accordance with paragraph 7.4.136; trade date accounting has the same meaning as “trade date accounting” under FRS 109; trading book has the meaning in Sub-division 5 of Division 1 of Part VIII; trading desk has the meaning in paragraph 8.1.62; trading-related repo-style transactions means repo-style transactions that are entered into by a Reporting Bank for the purposes of market-making, locking in arbitrage profits or creating short credit or equity positions; traditional securitisation means a structure where the cash flow from an underlying exposure or pool of exposures is used to service at least 2 different tranches reflecting different degrees of credit risk; tranche means a contractually established segment of the credit risk associated with an underlying exposure or pool of exposures, where a position in the segment entails a risk of credit loss greater than or less than a position of the same amount in each other such segment, without taking account of credit protection provided by third parties directly to the holders of positions in the segment or in other segments; uncompensated prepayments means any prepayment of a loan, or any part of it, for which the economic cost is not charged to the obligor; unconsolidated financial institution means a financial institution whose assets and liabilities are not included in the consolidated financial statements of the Reporting Bank; unconsolidated major stake company means a major stake company whose assets and liabilities are not included in the consolidated financial statements of the Reporting Bank; unfunded credit protection means a CRM where the reduction of the credit risk of an exposure of a Reporting Bank is derived from the undertaking of a third party to pay an amount in the event of the default of a counterparty or on the occurrence of other specified events; unrated in relation to any exposure, means that the exposure does not have an external credit assessment from a recognised ECAI;

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UST exposure or unsettled transaction exposure means any exposure of a Reporting Bank in respect of a transaction on securities, foreign exchange instruments or commodities that gives rise to a risk of delayed settlement or delivery, including a transaction that – (a) is made through a CCP; (b) is subject to daily mark-to-market and payment of daily variation margins; and (c) involves a mismatched trade, but does not include any CCR exposure; UST-DvP RWA means the risk-weighted assets for UST exposures arising from unsettled DvP transactions calculated in accordance with Subdivision 2 of Division 8 of Part VII; UST-non-DvP RWA means the risk-weighted assets for UST exposures arising from unsettled non-DvP transactions calculated in accordance with Sub-division 3 of Division 8 of Part VII; VaR or value-atrisk in relation to a portfolio of instruments, means the maximum expected loss on the portfolio of instruments resulting from market movements over a given time horizon at a particular confidence level; variation margin in relation to exposures to a CCP, means funded collateral of a clearing member or a client of a clearing member posted on a daily or intraday basis to a CCP based on price movements of the transactions of the clearing member or the client of a clearing member; vega risk in relation to market risk and CVA risk, means the potential loss resulting from the change in value of a derivative due to a change in the implied volatility of an underlying instrument; walkaway clause means any provision which permits a party to a netting agreement that is not in default to make limited payments or no payments at all, to a defaulting party under the same netting agreement, even if the party that is in default is a net creditor under the netting agreement; wholesale exposure in relation to the IRBA, means an exposure that falls within paragraph 7.4.42.

Monetary Authority of Singapore 3-1
PART III: SCOPE OF APPLICATION
Division 1: Capital Adequacy Ratio Requirements Requirements to Apply at both the Solo and Group Levels
3.1.1 A Reporting Bank must comply with the capital adequacy ratio requirements in
this Notice at 2 levels:
(a) the bank standalone (“Solo”) level capital adequacy ratio requirements, which measure the capital adequacy of a Reporting Bank based on its standalone capital strength and risk profile; (b) the consolidated (“Group”) level capital adequacy ratio requirements, which measure the capital adequacy of a Reporting Bank based on its capital strength and risk profile after consolidating the assets and liabilities of its banking group entities, taking into account – (i) any exclusions of certain banking group entities provided for under paragraphs 3.1.2 and 3.1.3; and (ii) any adjustments pursuant to Division 6 of Part VII. Non-consolidation of Certain Subsidiaries at the Group Level
3.1.2 A Reporting Bank must –
(a) not consolidate the assets and liabilities of an insurance subsidiary; and (b) account for the investment in such a subsidiary at cost, when preparing the consolidated financial statements of the banking group for the purposes of calculating its capital adequacy ratio requirements at the Group level.
3.1.3 Subject to paragraph 3.1.2 and Part VI, a Reporting Bank may exclude from
consolidation the assets and liabilities of any other subsidiary when preparing the consolidated financial statements of the banking group for the purposes of calculating its capital adequacy ratio requirements at the Group level only where such non-consolidation is expressly permitted under the Accounting Standards. Despite the provisions set out in this paragraph, the exemption for an entity that is a parent from presenting consolidated financial statements in paragraph 4(a) of FRS 110 does not apply to the Reporting Bank for the purposes of complying with paragraph 3.1.1(b).
3.1.4 Pursuant to paragraphs 3.1.1(b), 3.1.2 and 3.1.3, and for the purposes of the
capital adequacy ratio requirements at the Group level in this Notice (other than paragraphs 3.1.1(b), 3.1.2 and 3.1.3), a Reporting Bank must deem – (a) all assets, liabilities, equity, transactions, exposures and operations of a banking group entity of a Reporting Bank to be that of the Reporting Bank

Monetary Authority of Singapore 3-2
(per the scope of consolidation in paragraphs 3.1.1(b), 3.1.2 and 3.1.3); and (b) all collateral held by a banking group entity of a Reporting Bank to be collateral held by the Reporting Bank (per the scope of consolidation in paragraphs 3.1.1(b), 3.1.2 and 3.1.3). Issuers of covered bonds
3.1.5 Where the Reporting Bank issues covered bonds, the Reporting Bank must
continue to hold capital against its exposures in respect of the assets included in a cover pool in accordance with this Notice. Where the Reporting Bank uses an SPV to issue covered bonds or to hold the cover pool, the Reporting Bank must apply a “look through” approach for the purposes of computing capital requirements under this Notice. Under the “look through” approach, the Reporting Bank must treat the Reporting Bank and the SPV as a single entity for the purposes of this Notice by – (a) deeming the assets of the cover pool held in the SPV (if any) as assets of the Reporting Bank, at both the Solo and Group levels; and (b) eliminating transactions between the Reporting Bank and the SPV. Division 2: Leverage Ratio Requirements Requirements to Apply at both the Solo and Group Levels
3.2.1 A Reporting Bank must comply with the leverage ratio requirements in this
Notice at 2 levels:
(a) the bank standalone (“Solo”) level, which measures the leverage ratio of a Reporting Bank based on its standalone capital strength; (b) the consolidated (“Group”) level, which measures the leverage ratio of a Reporting Bank based on its capital strength after consolidating the assets and liabilities of its banking group entities, taking into account – (i) any exclusions of certain banking group entities provided for under paragraphs 3.2.2 and 3.2.3; and (ii) any adjustments pursuant to Division 6 of Part VII. Non-consolidation of Certain Subsidiaries at the Group Level
3.2.2 A Reporting Bank must –
(a) not consolidate the assets and liabilities of an insurance subsidiary; and (b) account for the investment in such a subsidiary at cost,

Monetary Authority of Singapore 3-3 when preparing the consolidated financial statements of the banking group for the purposes of calculating its leverage ratio at the Group level.
3.2.3 Subject to paragraph 3.2.2 and Part VI, a Reporting Bank may exclude from
consolidation the assets and liabilities of any other subsidiary when preparing the consolidated financial statements of the banking group for the purposes of calculating its leverage ratio at the Group level only where such non-consolidation is expressly permitted under the Accounting Standards. Notwithstanding the provisions set out in this paragraph, the exemption for an entity that is a parent from presenting consolidated financial statements in paragraph 4(a) of FRS 110 does not apply to the Reporting Bank for the purposes of complying with paragraph 3.2.1(b).
3.2.4 Pursuant to paragraphs 3.2.1(b), 3.2.2 and 3.2.3, and for the purposes of the
leverage ratio requirements at the Group level in this Notice (other than paragraphs 3.2.1(b), 3.2.2 and 3.2.3), a Reporting Bank must deem – (a) all assets, liabilities, equity, transactions, exposures and operations of a banking group entity of a Reporting Bank to be that of the Reporting Bank (per the scope of consolidation in paragraphs 3.2.1(b), 3.2.2 and 3.2.3); and (b) all collateral held by a banking group entity of a Reporting Bank to be collateral held by the Reporting Bank (per the scope of consolidation in paragraphs 3.2.1(b), 3.2.2 and 3.2.3).

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PART IV: CAPITAL ADEQUACY RATIOS AND LEVERAGE RATIO
Division 1: Capital Adequacy Ratios
4.1.1 A Reporting Bank must calculate its Common Equity Tier 1 CAR as follows:
CET1 Capital
CET1 CAR = ---------------------------------------------------------- Credit RWA + Market RWA + Operational RWA
4.1.2 A Reporting Bank must calculate its Tier 1 CAR as follows:
Tier 1 Capital
Tier 1 CAR = ---------------------------------------------------------- Credit RWA + Market RWA + Operational RWA
4.1.3 A Reporting Bank must calculate its Total CAR as follows:
Eligible Total Capital
Total CAR = ---------------------------------------------------------- Credit RWA + Market RWA + Operational RWA
4.1.4 A Reporting Bank must determine37 the denominators for CET1 CAR, Tier 1 CAR
and Total CAR by taking the higher of –
(a) the sum of credit RWA, market RWA, and operational RWA, calculated using the Reporting Bank’s nominated approaches; and (b) its output floor calculated in accordance with Part V. Minimum ratios
4.1.5 A Reporting Bank that is designated by the Authority as a D-SIB38 must, at all
times, maintain at both the Solo and Group levels, the minimum ratios set out in
Table 4-1:
Table 4-1: Minimum ratios for a Reporting Bank that is designated by the Authority as a
D-SIB
Minimum CAR
Minimum CET1 CAR 6.5%
Minimum Tier 1 CAR 8%
Minimum Total CAR 10%
37 Table 4A-1 provides a simple example of how a Reporting Bank must determine the denominators for CET1 CAR, Tier 1 CAR and Total CAR, assuming an output floor calibration of 72.5%. 38 The list of designated D-SIBs is published on the Authority’s website.

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4.1.6 A Reporting Bank that is not designated by the Authority as a D-SIB must, at
all times, maintain at both the Solo and Group levels the minimum ratios set out in
Table 4-2:
Table 4-2: Minimum ratios for a Reporting Bank that is not designated by the Authority as
a D-SIB
Minimum CAR
Minimum CET1 CAR 4.5%
Minimum Tier 1 CAR 6%
Minimum Total CAR 8%
Capital conservation buffer
4.1.7 In addition to complying with the applicable minimum ratios in paragraph 4.1.5
or 4.1.6, as the case may be, a Reporting Bank must, at all times, maintain at both the Solo and Group levels, a capital conservation buffer comprising CET1 Capital of 2.5% of the relevant denominators as determined in paragraph 4.1.4. [MAS Notice 637 (Amendment) 2025]
4.1.8 A Reporting Bank must ensure that its CET1 Capital is first used to meet the
applicable minimum ratios in paragraph 4.1.5 or 4.1.6, as the case may be, before the remainder can count towards its capital conservation buffer.
4.1.9 For the purposes of paragraphs 4.1.10, 4.1.11, 4.1.12, 4.1.13, 4.1.14 and
4.1.25 –
(a) “CET1 CAR” in Tables 4-3 and 4-4, calculated as at the date of each distribution of an item subject to the restriction on distributions (“calculation date”), includes CET1 Capital used to meet the applicable minimum CET1 CAR in paragraph 4.1.5 or 4.1.6, as the case may be, but excludes any additional CET1 Capital needed to meet the applicable minimum Tier 1 CAR and applicable minimum Total CAR in paragraph
4.1.5 or 4.1.6, as the case may be;
(b) “buffer” refers to the capital conservation buffer set out in paragraph 4.1.7; (c) “distribution payment period” refers to the 12 months starting from the calculation date referred to in sub-paragraph (a); (d) “minimum capital conservation ratios” refer to the percentage of a Reporting Bank’s earnings, as defined in sub-paragraph (f), that a Reporting Bank is required to conserve in the distribution payment period; (e) “item subject to the restriction on distributions” refers to any distribution in the form of dividends, share buybacks, discretionary payments on AT1 capital instruments and discretionary bonus payments to staff, but excludes the following:

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(i) a payment that does not result in a depletion of CET1 Capital by the Reporting Bank39; (ii) a dividend which satisfies all of the following conditions:
(A) the dividend cannot legally be cancelled by the Reporting Bank; (B) the dividend has already been removed from CET1 Capital prior to the distribution of the dividend; (C) the dividend was declared in line with the applicable capital conservation ratios set out in paragraph 4.1.11 at the date of declaration; and (f) “earnings” refers to the Reporting Bank’s distributable profits in the 4 quarters preceding the calculation date, calculated gross of the deduction of items subject to the restriction on distributions and less the tax which would have been payable had none of the items subject to the restriction on distributions been paid40 .
4.1.10 For the purposes of this Part, the capital conservation buffer range refers to –
(a) for a Reporting Bank that is designated by the Authority as a D-SIB, a CET1 CAR as defined in paragraph 4.1.9(a) of between 6.5% and the sum of 6.5% and the capital conservation buffer as defined in paragraph 4.1.7; and (b) for a Reporting Bank that is not designated by the Authority as a D-SIB, a CET1 CAR as defined in paragraph 4.1.9(a) of between 4.5% and the sum of 4.5% and the capital conservation buffer as defined in paragraph 4.1.7.
4.1.11 Despite paragraph 4.1.7, where the CET1 CAR as defined in paragraph 4.1.9(a)
of a Reporting Bank is within the capital conservation buffer range41 as at the date of each distribution of an item subject to the restriction on distributions – (a) a Reporting Bank that is designated by the Authority as a D-SIB must meet the minimum capital conservation ratios corresponding to the ranges of CET1 CAR, as defined in paragraph 4.1.9(a), set out in Table 4-3 in accordance with paragraphs 4.1.9 and 4.1.12; and (b) a Reporting Bank that is not designated by the Authority as a D-SIB must meet the minimum capital conservation ratios corresponding to the ranges of CET1 CAR, as defined in paragraph 4.1.9(a), set out in Table 4-4 in accordance with paragraphs 4.1.9 and 4.1.12. 39 For example, scrip dividends. 40 This is to reverse any tax impact of making such distributions. 41 For example, in periods of stress. A Reporting Bank should not choose in normal times, outside periods of stress, to operate within the capital conservation buffer range.

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Table 4-3: Minimum capital conservation ratios for a Reporting Bank that is designated by
the Authority as a D-SIB
CET1 CAR Minimum capital conservation ratios
(expressed as a percentage of earnings) first quartile of buffer:
6.5% - 7.125% 100% second quartile of buffer:

7.125% - 7.75% 80% third quartile of buffer:
7.75% - 8.375% 60% fourth quartile of buffer:
8.375% - 9% 40%
Above top of buffer: >9% 0%
Table 4-4: Minimum capital conservation ratios for a Reporting Bank that is not designated
by the Authority as a D-SIB
CET1 CAR Minimum capital conservation ratios
(expressed as a percentage of earnings) first quartile of buffer:
4.5% - 5.125% 100% second quartile of buffer:
5.125% - 5.75% 80% third quartile of buffer:
5.75% - 6.375% 60% fourth quartile of buffer:
6.375% - 7% 40%
Above top of buffer: >7% 0%
4.1.12 In respect of items subject to the restriction on distributions42
, the Reporting
Bank must, in any distribution payment period, distribute no more than the percentage of (100% less the minimum capital conservation ratio) of its earnings.
4.1.13 To avoid doubt, for the purposes of paragraph 4.1.12 –
(a) where a Reporting Bank’s CET1 CAR, as defined in paragraph 4.1.9(a), falls into a lower quartile of buffer as at the next calculation date for the next distribution payment period, the higher minimum capital conservation ratio applicable to the lower quartile of buffer would apply for the next distribution payment period; and (b) where a Reporting Bank’s CET1 CAR, as defined in paragraph 4.1.9(a), falls into an upper quartile of buffer as at the next calculation date for the next distribution payment period, the higher minimum capital conservation ratio applicable to the current distribution payment period 42 For example, a Reporting Bank that is designated by the Authority as a D-SIB with a CET1 CAR in the range of greater than 7.125% to 7.75% is required to conserve 80% of its earnings in the distribution payment period (i.e. distribute no more than 20% of earnings in terms of items subject to the restriction on distributions). To avoid doubt, the capital conservation requirement applies to items subject to the restriction on distributions only, not the operation of the Reporting Bank. A Reporting Bank should be able to conduct business as normal when its capital adequacy ratios fall within the capital conservation buffer range as it experiences losses.

Monetary Authority of Singapore 4-5 would continue to apply until the end of the current distribution payment period.
4.1.14 Despite paragraph 4.1.11, where a Reporting Bank –
(a) does not have positive earnings; and
(b) has a CET1 CAR as defined in paragraph 4.1.9(a) of less than the sum of – (i) the applicable minimum CET1 CAR in paragraph 4.1.5 or 4.1.6, as the case may be; and (ii) the capital conservation buffer in accordance with paragraph 4.1.7, the Reporting Bank must not make distributions of any item subject to the restriction on distributions in the distribution payment period.
4.1.15 Despite paragraphs 4.1.11, 4.1.12 and 4.1.14 which impose constraints on
distributions, a Reporting Bank may, with the Authority’s prior written approval, make any distributions in excess of the constraints imposed by those paragraphs, provided that the Reporting Bank raises capital in the private sector equal to the amount above the constraint that it wishes to distribute and subject to any further conditions and restrictions that the Authority may specify in its approval.
4.1.16 A Reporting Bank intending to draw on its capital conservation buffer must
consult the Authority in advance and must present a capital plan on the rebuilding of the capital conservation buffer. The Reporting Bank must demonstrate to the satisfaction of the Authority that its capital plan will rebuild the capital conservation buffer within an appropriate timeframe.43 The Authority may impose a time limit on a Reporting Bank operating within the capital conservation buffer range for, or other conditions related to, the rebuilding of the capital conservation buffer. Countercyclical buffer
4.1.17 In addition to complying with the applicable minimum ratios in paragraph 4.1.5
or 4.1.6, as the case may be, and the capital conservation buffer in paragraph 4.1.7, a Reporting Bank must, at all times, maintain at both the Solo and Group levels, a countercyclical buffer comprising CET1 Capital ranging from zero up to 2.5% of the relevant denominators as determined in paragraph 4.1.4. To avoid doubt, the countercyclical buffer applicable to a Reporting Bank can be 0% at a particular point in time. [MAS Notice 637 (Amendment) 2025] 43 A Reporting Bank operating within the capital conservation buffer range may look to rebuild its capital buffers through reducing discretionary distribution of earnings including reducing discretionary dividend payments, share-buybacks and staff bonus payments. The Reporting Bank may also choose to raise new capital from the private sector as an alternative to conserving internally generated capital. The Reporting Bank should not use future predictions of recovery as justification for maintaining distributions to shareholders, other capital providers and staff. The Reporting Bank should not signal their financial strength through the distribution of capital. The Reporting Bank should also make greater efforts to rebuild its capital buffers the more they are depleted.

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4.1.18 For the purposes of paragraphs 4.1.19, 4.1.22, 4.1.23 and 4.1.28 to 4.1.31 –
(a) “country-specific countercyclical buffer requirement” means the countercyclical buffer requirement in respect of a particular country or jurisdiction (expressed as a percentage of RWA), which – (i) in the case of Singapore, the Authority has applied; and (ii) in the case of a country or jurisdiction other than Singapore, the national authority has applied44,45, subject to a cap of 2.5% unless the Authority specifies that the cap does not apply or that a higher country-specific countercyclical buffer requirement applies, and subject to paragraph 4.1.21; and (b) “RWA for private sector credit exposures” means, in relation to a Reporting Bank, the aggregate of – (i) the credit RWA in respect of all the exposures in its banking book, other than – (A) SA(CR) exposures referred to in paragraph 7.3.1(a), (b), (c), (d), (e)(i), (e)(ii), (e)(iii) and (e)(iv); and (B) IRBA exposures referred to in paragraph 7.4.42(c) and (d), except for IRBA exposures to counterparties referred to in paragraphs 7.3.1(e)(v) and 7.4.42(d)(iv); and (ii) 12.5 times of – (A) for the period from 1 July 2024 to 31 December 2024 (both dates inclusive), the market risk capital requirements for specific risk, IRC and securitisation exposures, where applicable, calculated in accordance with Part VIII of MAS Notice 637, in force immediately before 1 July 2024, in respect 44 A Reporting Bank may refer to the document, “Guidance for national authorities operating the countercyclical capital buffer” issued by the BCBS in December 2010, to understand the factors that could be considered by national authorities in applying the countercyclical buffer requirement. 45 A country or jurisdiction is expected to announce, and promptly notify the Bank for International Settlements of – (a) any decision to raise the level of the countercyclical buffer requirement for its country or jurisdiction up to 12 months prior to the requirement taking effect; and (b) any decision to lower the level of the countercyclical buffer requirement for its country or jurisdiction. The country or jurisdiction is also expected to communicate its buffer decisions to the Bank for International Settlements at least annually, including where there is no change in the prevailing countercyclical buffer requirements. The pre-announced buffer decisions and the actual buffers in place for BCBS member countries or jurisdictions will be published on the website of the Bank for International Settlements. [MAS Notice 637 (Amendment) 2025]

Monetary Authority of Singapore 4-7 of all the exposures in the trading book, other than exposures to other banks, sovereigns, MDBs and PSEs46; and (B) in all other cases:
(I) where the Reporting Bank uses the SA(MR), the DRC requirement, calculated in accordance with Division 2 of
Part VIII in respect of securitisation (CTP), securitisation
(non-CTP) and non-securitisation exposures in the trading book47; (II) where the Reporting Bank uses the IMA, the DRC requirement calculated in accordance with paragraphs
8.3.213 to 8.3.240 in respect of both securitisation and
non-securitisation exposures in the trading book48; (III) where the Reporting Bank only uses the SSA(MR), its market risk capital requirements for specific risk in respect of both securitisation and non-securitisation exposures in the trading book, where the scope of the exposures excludes exposures to other banks, sovereigns, MDBs and PSEs. 46 In the case of a Reporting Bank using the IMA under Part VIII of MAS Notice 637, in force immediately before 1 July 2024, for calculating its market risk capital requirement for the period from 1 July 2024 to 31 December 2024 (both dates inclusive), the Reporting Bank should develop an approach that would translate the VaR for specific risk, the IRC and the comprehensive risk measurement charge into individual instrument risk weights that would then be allocated to the geographic location of the specific counterparties that make up the charge based on where the ultimate risk of the exposures reside. The manner in which the translation is done should be subject to the agreement of the Authority. In cases where it is not possible to break down the charges in such a manner due to the risk charges being calculated on a portfolio by portfolio basis, the risk charge for a particular portfolio should be allocated to the geographic regions of the constituents of the portfolio by calculating the proportion of the portfolio’s total EAD that is due to the EAD resulting from counterparties in each geographic region based on where the ultimate risk of the exposures reside. 47 The Reporting Bank should develop an approach that would translate the DRC requirement into individual instrument risk weights that would then be allocated to the geographical location of the specific counterparties of the exposures that make up the DRC requirement, based on where the ultimate risk of the exposures reside. The manner in which the translation is done should be subject to the agreement of the Authority. In cases where it is not possible to break down the DRC requirement in such a manner due to the DRC requirement being calculated on a portfolio by portfolio basis, the DRC requirement for a particular portfolio should be allocated to the geographic regions of the constituents of the portfolio by calculating the proportion of the portfolio’s total EAD that is due to the EAD resulting from counterparties in each geographic region based on where the ultimate risk of the exposures reside. 48 The Reporting Bank should develop an approach that would translate the DRC requirement into individual instrument risk weights that would then be allocated to the geographical location of the specific counterparties of the exposures that make up the DRC requirement, based on where the ultimate risk of the exposures reside. The manner in which the translation is done should be subject to the agreement of the Authority. In cases where it is not possible to break down the DRC requirement in such a manner due to the DRC requirement being calculated on a
portfolio by portfolio basis, the DRC requirement for a particular portfolio should be allocated to the geographic regions of the constituents of the portfolio by calculating the proportion of the portfolio’s total EAD that is due to the EAD resulting from counterparties in each geographic region based on where the ultimate risk of the exposures reside.

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To avoid doubt, a Reporting Bank must include exposures to non-bank financial institutions within the scope of private sector credit exposures for the purposes of sub-paragraph (b). [MAS Notice 637 (Amendment) 2024]
4.1.19 A Reporting Bank must calculate the actual magnitude of the countercyclical
buffer to be applied under paragraph 4.1.17 as the weighted average of the countryspecific countercyclical buffer requirements that are being applied in countries or jurisdictions by national authorities to which the Reporting Bank has private sector credit exposures. The Reporting Bank must – (a) calculate each weighting by dividing the Reporting Bank’s RWA for all its private sector credit exposures in each country or jurisdiction by the Reporting Bank’s RWA for all its private sector credit exposures across all countries or jurisdictions; and (b) apply the weighting calculated in sub-paragraph (a) for each country or jurisdiction to the country-specific countercyclical buffer requirement of that country or jurisdiction.
4.1.20 A country or jurisdiction whose national authority is a member of the BCBS or
that is specified by the Authority, is referred to in paragraph 4.1.21 as a relevant country or jurisdiction.
4.1.21 For the purposes of paragraph 4.1.19, a Reporting Bank must apply a weight
of zero to –
(a) a relevant country or jurisdiction where its private sector credit exposures to that relevant country or jurisdiction is zero; or (b) a country or jurisdiction that is not a relevant country or jurisdiction.
4.1.22 For the purposes of paragraph 4.1.19, a Reporting Bank must determine the
country or jurisdiction for each private sector exposure in accordance with Annex 4B.
4.1.23 Subject to paragraph 4.1.21, for the purposes of paragraph 4.1.19, a Reporting
Bank must apply each country-specific countercyclical buffer requirement in calculating its countercyclical buffer from the effective date specified by the relevant national authority except in the following cases where the Reporting Bank must apply each country-specific countercyclical buffer requirement in calculating its countercyclical buffer from the effective date specified by the Authority – (a) for an increase in a countercyclical buffer requirement in respect of a country or jurisdiction other than Singapore, where the period between the date of announcement and the effective date of the countercyclical capital buffer requirement is less than 12 months, and the Authority specifies a different effective date, no more than 12 months from the date of announcement by that country or jurisdiction; and

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(b) for a decrease in a countercyclical buffer requirement in respect of a country or jurisdiction other than Singapore, where the Authority specifies a later effective date.
4.1.24 A Reporting Bank must ensure that the size of the capital conservation buffer
applicable to a Reporting Bank under paragraph 4.1.7 is extended by the countercyclical buffer.
4.1.25 Despite paragraphs 4.1.7 and 4.1.17, where the CET1 CAR as defined in
paragraph 4.1.9(a) is within the capital conservation buffer range referred to in paragraph 4.1.10, extended by the countercyclical buffer, the Reporting Bank must meet the minimum capital conservation ratios corresponding to the ranges of CET1 CAR calculated in accordance with paragraph 4.1.9(a), as set out in Table 4-5. 49

Table 4-5: Minimum capital conservation ratios for a Reporting Bank that is subject to a
countercyclical buffer
CET1 CAR
Minimum capital conservation ratios (expressed as a percentage of earnings) ≤ Aggregate of the applicable minimum CET1 CAR and ¼ of buffer 100%

Aggregate of the applicable minimum CET1
CAR and ¼ of buffer, ≤ Aggregate of the applicable minimum CET1 CAR and ½ of buffer 80%
Aggregate of the applicable minimum CET1
CAR and ½ of buffer, ≤ Aggregate of the applicable minimum CET1 CAR and ¾ of buffer 60%
Aggregate of the applicable minimum CET1
CAR and ¾ of buffer, ≤ Aggregate of the applicable minimum CET1 CAR and buffer 40% 49 Tables 4-6 and 4-7 illustrate the applicable ranges of CET1 CAR corresponding to various minimum capital conservation ratios, assuming a countercyclical buffer of 2.5%.
Table 4-6: Minimum capital conservation ratios for a Reporting Bank that is designated by the Authority as a
D-SIB that is subject to a countercyclical buffer of 2.5% CET1 CAR Minimum capital conservation ratios (expressed as a percentage of earnings) 6.5% - 7.75% 100% >7.75% - 9% 80% >9% - 10.25% 60% >10.25% - 11.5% 40% >11.5% 0%
Table 4-7: Minimum capital conservation ratios for a Reporting Bank that is not designated by the Authority as
a D-SIB that is subject to a countercyclical buffer of 2.5% CET1 CAR Minimum capital conservation ratios (expressed as a percentage of earnings) 4.5% - 5.75% 100% >5.75% - 7% 80% >7% - 8.25% 60% >8.25% - 9.5% 40% >9.5% 0%

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CET1 CAR
Minimum capital conservation ratios (expressed as a percentage of earnings) Above top of buffer 0%
4.1.26 To avoid doubt, paragraphs 4.1.8, 4.1.9, 4.1.10, 4.1.12, 4.1.14, 4.1.15 and
4.1.16 apply to a Reporting Bank which is subject to a countercyclical buffer. “Capital
conservation buffer” in those paragraphs must be read to include the countercyclical buffer in such cases.
4.1.27 A Reporting Bank must ensure that its countercyclical buffer is calculated with
at least the same frequency as its capital adequacy ratios. The Reporting Bank must calculate its countercyclical buffer based on the latest relevant country-specific countercyclical buffer requirements that are applicable at the date which the Reporting Bank calculates its capital adequacy ratios. National countercyclical buffer requirements
4.1.28 Where the Authority has assessed a period of excess credit growth to be leading
to a build up of system-wide risk, the Authority will consider setting a countercyclical buffer requirement in respect of Singapore (“Singapore-specific countercyclical buffer requirement”). The Authority will determine the size of the Singapore-specific countercyclical buffer requirement.
4.1.29 For the purposes of paragraph 4.1.28, the Singapore-specific countercyclical
buffer requirement will range from zero to 2.5% of the relevant denominators as determined in paragraph 4.1.4, based on the Authority’s assessment of the extent of the build-up of system-wide risk. The Authority will apply the principles in the document, “Guidance for national authorities operating the countercyclical buffer” issued by the BCBS in December 2010, in making its decisions on the level of the Singapore-specific countercyclical buffer requirement. [MAS Notice 637 (Amendment) 2025]
4.1.30 The Authority may implement a range of additional macroprudential tools
including setting a Singapore-specific countercyclical buffer requirement that is higher than 2.5% of the relevant denominators as determined in paragraph 4.1.4 despite paragraph 4.1.29, if the Authority deems it necessary to do so, based on the Authority’s assessment of the extent of excess credit growth and build-up of system-wide risk in Singapore. [MAS Notice 637 (Amendment) 2025]
4.1.31 The Authority will announce any decision by the Authority to set or to increase
the Singapore-specific countercyclical buffer requirement, prior to but no longer than 12 months before Singapore-specific countercyclical buffer requirement is to take effect.

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4.1.32 The Authority will announce any decision by the Authority to decrease the
Singapore-specific countercyclical buffer requirement, and any such decision will take effect from the date of the announcement, unless otherwise specified by the Authority. 50 Overall capital adequacy
4.1.33 Despite that a Reporting Bank has complied with the requirements set out in
paragraphs 4.1.5, 4.1.6, 4.1.7 and 4.1.17, the Reporting Bank must consider as part of its ICAAP whether it has adequate capital at both the Solo and Group levels, to cover its exposure to all risks.
4.1.34 The Authority may, pursuant to section 10(3) of the Banking Act, vary the
minimum CET1 CAR, minimum Tier 1 CAR, minimum Total CAR, capital conservation buffer or countercyclical buffer applicable to a Reporting Bank. In exercising this discretion, the Authority may take into account, inter alia, any relevant risk factor, the ICAAP of a Reporting Bank and whether the CET1 CAR, Tier 1 CAR or Total CAR is commensurate with the overall risk profile of the Reporting Bank. 50 The Authority will communicate any of its announcements to set, increase, or decrease the Singaporespecific countercyclical buffer requirement promptly to the Bank for International Settlements. The Authority will also communicate its buffer decisions to the Bank for International Settlements at least annually, including where there is no change to the prevailing Singapore-specific countercyclical buffer requirement.

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Division 2: Leverage Ratio51
4.2.1 A Reporting Bank must calculate its leverage ratio as set out in Annex 4C.
4.2.2 A Reporting Bank must, at all times, maintain at both the Solo and Group levels,
a minimum leverage ratio of 3%.
51 The leverage ratio is intended to –
(a) restrict the build-up of leverage in the banking sector to avoid destabilising deleveraging processes that damage the broader financial system and the economy; and (b) reinforce the risk-based capital requirements with a simple, non-risk-based “backstop” measure.

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Annex 4A
DENOMINATORS FOR CET1 CAR, TIER 1 CAR AND TOTAL CAR
Table 4A-1: Example of how a Reporting Bank must determine the denominators
for CET1 CAR, Tier 1 CAR and Total CAR
RWA calculated using the
Reporting
Bank’s nominated approaches
RWA calculated using only standardised approaches 72.5% of total RWA calculated using only standardised approaches Credit RWA 62 124 -

of which Asset Class A 45 80 -
of which Asset Class B 5 32 -
of which Asset Class C (for which the
Reporting Bank’s nominated approach is the standardised approach) 12 12 - Market RWA 2 4 - Operational RWA 12 12 - Total RWA 76 140 101.5 As the output floor (101.5) is higher than the sum of credit RWA, market RWA, and operational RWA, calculated using the Reporting Bank’s nominated approaches (76), the Reporting Bank must use the output floor as the denominator for CET1 CAR, Tier 1 CAR and Total CAR.

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Annex 4B
DETERMINATION OF COUNTRY OR JURISDICTION FOR A PRIVATE SECTOR CREDIT EXPOSURE
1.1 Subject to paragraph 1.5 of this Annex, a Reporting Bank must determine the
country or jurisdiction for a private sector credit exposure based on the country or jurisdiction where the ultimate risk of the exposure resides, in accordance with the principles to identify the country or jurisdiction of ultimate risk in
Table 4B-1, and paragraphs 1.3 and 1.4 of this Annex.
1.2 For the purposes of Table 4B-1, a Reporting Bank must apply the principles
described under “(I) Basic scenario” to identify the country or jurisdiction of ultimate risk for a private sector credit exposure, unless the principles described under “(II) Specific scenarios for other exposures” in the subsequent rows are applicable.
1.3 For a private sector credit exposure with credit protection, the country or
jurisdiction where the ultimate risk of the exposure resides refers to the country or jurisdiction where the counterparty providing the credit protection resides.
1.4 For the purposes of paragraph 1.3 of this Annex, where a private sector credit
exposure has more than one counterparty providing the credit protection, a Reporting Bank must sub-divide the exposure into portions covered by the credit protection provided by each counterparty. For each sub-divided portion of the exposure, the country or jurisdiction where the ultimate risk of the exposure resides, refers to the country or jurisdiction where the counterparty providing the credit protection resides.
1.5 In the case of securitisation exposures, where a Reporting Bank is unable to
look through to the underlying exposures, the Reporting Bank must use the country or jurisdiction where the immediate counterparty resides.
1.6 Where a Reporting Bank is unable to identify the country or jurisdiction of
ultimate risk for a private sector credit exposure in accordance with paragraph 1.1 of this
Annex, the Reporting Bank may determine the country or jurisdiction of the private sector
credit exposure based on the country or jurisdiction where the private sector credit exposure is booked. The Reporting Bank must demonstrate to the Authority why it is unable to do so if requested by the Authority.
Table 4B-1– Principles to identify the Country or Jurisdiction of Ultimate Risk for
a Private Sector Credit Exposure
Scenario Country or Jurisdiction of
Ultimate Risk
(I) Basic scenario
Obligor residing in country or jurisdiction A:
Exposure has no credit protection A
Exposure has credit protection from a counterparty residing in country or jurisdiction A A

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Scenario Country or Jurisdiction of
Ultimate Risk
Exposure has credit protection from a counterparty residing in country or jurisdiction B B Obligor is a branch of parent residing in country or jurisdiction B where the exposure has no credit protection B (II) Specific scenarios for other exposures Exposures relating to repo transaction with a counterparty residing in country or jurisdiction A (independent of geographical location of risk of collateral) A Securitisation exposures (where a Reporting Bank is able to look through to the underlying exposures) issued in country or jurisdiction A:
Debtor of underlying exposure is residing in country or jurisdiction A A Debtor of underlying exposure is residing in country or jurisdiction B B Exposures relating to project finance where the obligor is residing in country or jurisdiction A and the project is located in country or jurisdiction B B Exposures to collective investment schemes constituted in country or jurisdiction A Depends on whether the Reporting Bank has a debt or equity exposure to the collective investment scheme:
(a) if the Reporting Bank has a debt exposure, the country or jurisdiction of ultimate risk – (i) where the exposure has no credit protection, the country or jurisdiction where the collective investment scheme is constituted or if the collective investment scheme has a parent entity, the country or jurisdiction where its parent entity resides; and (ii) where the exposure has credit protection, the country or jurisdiction

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Scenario Country or Jurisdiction of
Ultimate Risk where the counterparty providing the credit protection resides; (b) if the Reporting Bank has an equity exposure, the country or jurisdiction of ultimate risk is – (i) where a Reporting Bank is able to look through to the underlying exposures, the countries or jurisdictions where the counterparty of each underlying exposure resides; or (ii) where a Reporting Bank is unable to look through to the underlying exposures of the collective investment scheme without disproportionate effort, the Reporting Bank may adopt an alternative methodology to identify the countries or jurisdictions of ultimate risk for the collective investment scheme. The Reporting Bank must be able to demonstrate to the Authority that the alternative methodology reflects, to the extent possible, the principle in sub-paragraph b(i) of this
Table to identify the
countries or jurisdictions of ultimate risk, when requested by the Authority.

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Annex 4C
CALCULATION OF THE LEVERAGE RATIO
Section 1: Overview
1.1 A Reporting Bank must calculate its leverage ratio as follows:
Capital measure (CM)
Leverage ratio
(LR) = ------------------------------------------------ Total exposure measure (TEM) Scope of application
1.2 A Reporting Bank must calculate its leverage ratio at both the Solo and Group
levels as set out in Division 2 of Part III as at the end of each quarter. Where a Reporting Bank does not consolidate its investment in an entity in accordance with Division 2 of Part III, the Reporting Bank must only include the investment in the capital of such entity (i.e. only the carrying amount of the investment, and not the underlying assets and other exposures of the entity), in the calculation of its TEM.
1.3 A Reporting Bank may deduct in the calculation of its TEM any item which is
deducted in the calculation of CET1 Capital or AT1 Capital in accordance with paragraphs
6.1.5 and 6.2.6 respectively, including:
(a) the amount of any investment in the capital of an entity that is totally or partially deducted in the calculation of CET1 Capital or AT1 Capital in accordance with paragraphs 6.1.5(p) and 6.2.6(d) respectively, where the entity is not consolidated in accordance with Division 2 of Part III; (b) any shortfall of the TEP relative to the EL amount deducted in the calculation of CET1 Capital in accordance with paragraph 6.1.5(e), where the Reporting Bank has adopted the IRBA; (c) any valuation adjustments made in accordance with Annex 6C that exceed the valuation adjustments made under financial reporting standards, deducted in the calculation of CET1 Capital in accordance with paragraph 6.1.5(n), but a Reporting Bank must not deduct in the calculation of its TEM any item related to liabilities.
1.4 Where a Reporting Bank issues covered bonds, the Reporting Bank must
calculate its leverage ratio by including the EM in respect of assets included in a cover pool in the calculation of its TEM in accordance with this Annex. Where the Reporting Bank uses an SPV to issue covered bonds or to hold the cover pool, the Reporting Bank must apply a “look through” approach in calculating its leverage ratio under this Annex. Under the “look through” approach, the Reporting Bank must treat the Reporting Bank and the SPV as a single entity for the purposes of this Annex by –

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(a) deeming the assets of the cover pool held in the SPV (if any) as assets of the Reporting Bank, at both the Solo and Group levels; and (b) eliminating transactions between the Reporting Bank and the SPV.
Section 2: EM
2.1 Subject to paragraphs 2.2 to 2.53 of this Annex, a Reporting Bank must
calculate its TEM in accordance with the Accounting Standards.
2.2 Unless otherwise specified in this Annex, a Reporting Bank must not net assets
against liabilities when calculating its TEM, and must not take into account physical or financial collateral, guarantees or other CRM to reduce its TEM.
2.3 A Reporting Bank must calculate its TEM by aggregating the sum of exposure
measures in respect of all the Reporting Bank’s – (a) on-balance sheet items calculated in accordance with paragraphs 2.8 to
2.12 of this Annex (other than items specified in sub-paragraphs (b) and
(c)) (“exposure measures in respect of on-balance sheet items”); (b) derivative transactions calculated in accordance with paragraphs 2.13 to
2.39 of this Annex (“exposure measures in respect of derivative
transactions”);
(c) SFTs (including SFTs that have failed to settle) calculated in accordance with paragraphs 2.40 to 2.50 of this Annex (“exposure measures in respect of SFTs”); and (d) off-balance sheet items calculated in accordance with paragraphs 2.51 to
2.53 of this Annex (other than items specified in sub-paragraphs (b) and
(c)) (“exposure measures in respect of off-balance sheet items”), and then applying deductions in accordance with paragraphs 1.3, 2.6, 2.8 and 2.21(b) of this Annex. Where an off-balance sheet item is treated as a derivative transaction under the Accounting Standards, the Reporting Bank must calculate the EM in respect of the item as a derivative transaction in accordance with sub-paragraph (b).
2.4 For the purposes of paragraph 2.3 of this Annex, a Reporting Bank must
calculate the exposure measures in respect of – (a) long settlement transactions; and (b) unsettled transactions other than SFTs, in accordance with their classification under the Accounting Standards, as follows:
(i) the EM in respect of a long settlement transaction classified as a derivative under the Accounting Standards must be calculated as the EM in respect of a derivative transaction under paragraph 2.3(b) of this Annex;

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(ii) the EM in respect of an unsettled transaction classified as a receivable under the Accounting Standards must be calculated as the EM in respect of an on-balance sheet item under paragraph 2.3(a) of this Annex.
2.5 A Reporting Bank must not deduct any liability item including any –
(a) gains or losses on fair valued liabilities; or (b) accounting valuation adjustments on derivative liabilities due to changes in the Reporting Bank’s own credit risk, as described in paragraph 6.1.5(h), in the calculation of its TEM.
2.6 A Reporting Bank which is an originator in a traditional securitisation may
deduct securitised exposures that are included in its on-balance sheet items, in the calculation of its TEM only if all of the requirements in Section 1 of Annex 7AC have been complied with. A Reporting Bank that deducts such securitised exposures in the calculation of its TEM must include the exposure measures in respect of any securitisation exposures it retains in the calculation of its TEM. To avoid doubt, in cases where – (a) a Reporting Bank is an originator in a traditional securitisation but not all the requirements in Section 1 of Annex 7AC have been complied with; or (b) a Reporting Bank is an originator in a synthetic securitisation, the Reporting Bank must not deduct its securitised exposures in the calculation of its TEM.
2.7 Where the Authority is concerned that the leverage of certain transactions or
structures undertaken by a Reporting Bank is not adequately captured in the calculation of its TEM, the Authority may impose additional bank-specific capital requirements or take any other supervisory action, such as requiring enhancements to a Reporting Bank’s management of leverage or imposing additional reporting to the Authority, to address the risks arising from such transactions.52 52 A Reporting Bank should be vigilant to transactions and structures, for which the leverage undertaken by the Reporting Bank is inadequately captured in the TEM. A Reporting Bank should consult the Authority on the appropriate treatment of any such transactions or structures, where such transactions or structures are identified or where the Reporting Bank is in doubt. Examples of transactions where such concerns may arise include – (a) an SFT where a Reporting Bank’s exposure to the SFT counterparty increases as the counterparty’s credit quality deteriorates; (b) an SFT where the credit quality of the SFT counterparty is positively correlated with the value of the securities posted by the counterparty with a Reporting Bank; (c) an SFT for which a Reporting Bank in substance acts as a principal, but structures the SFT such that it acts as an agent and calculates the EM in respect of the SFT in accordance with paragraph 2.47 or 2.49 of this Annex; and (d) a collateral swap trade or other transaction structured such that a Reporting Bank calculates the EM in respect of the transaction to be zero even though the Reporting Bank undertakes leverage through the transaction.

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On-balance Sheet Items
2.8 A Reporting Bank must include the exposure measures in respect of all onbalance sheet assets (including on-balance sheet collateral for any derivative transaction
and collateral for any SFT) in the calculation of its TEM. For on-balance sheet assets which are not derivative transactions, a Reporting Bank must calculate the EM in respect of such on-balance sheet assets, based on their carrying amount as determined in accordance with the Accounting Standards, net of specific allowances. A Reporting Bank may deduct general allowances that have been set aside against on-balance sheet assets and which have reduced CET1 Capital, in the calculation of its TEM.
2.9 Where a Reporting Bank has leased a tangible asset, the Reporting Bank must
include the EM in respect of a right of use asset in the calculation of its TEM.
2.10 A Reporting Bank may exclude in the calculation of its TEM, fiduciary assets that
meet the criteria for de-recognition and, where applicable, de-consolidation, under the Accounting Standards.
2.11 Where a Reporting Bank uses trade date accounting in its treatment of the
regular way purchase or sale of financial assets, the Reporting Bank must reverse out any offsetting that is recognised in accordance with the Accounting Standards, between cash receivables for unsettled sales of financial assets and cash payables for unsettled purchases of financial assets. However, the Reporting Bank may recognise offsetting between cash receivables for unsettled sales of financial assets and cash payables for unsettled purchases of financial assets, regardless of whether such offsetting is recognised under the Accounting Standards, where – (a) the financial assets are fair valued through the profit and loss account of the financial statements of the Reporting Bank; (b) the Reporting Bank allocates the financial assets to its trading book; and (c) the purchase or sale transactions of the financial assets are DvP transactions.
2.12 A Reporting Bank may calculate the EM in respect of a cash pooling arrangement
based on the combined single account balance where – (a) the Reporting Bank physically transfers and combines at least on a daily basis, the credit and debit balances of all the participating accounts, into a single account balance, such that the Reporting Bank is not liable for the balance of any participating account on an individual basis thereafter; or (b) all the following conditions are met:
(i) the cash pooling arrangement provides for a single designated account, in addition to the participating accounts, into which the Reporting Bank may transfer the balances of all participating accounts, such that the Reporting Bank is not liable for the balance of any participating account on an individual basis thereafter;

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(ii) the Reporting Bank has obtained a written independent legal opinion53 that at any point in time, the Reporting Bank has a legally enforceable right to perform such transfers, has the discretion and is in a position to exercise this right, and that the Reporting Bank is not liable for the balance of any participating account on an individual basis after such transfer; (iii) the Reporting Bank performs such transfers at least on a quarterly basis, or such other frequency specified by the Authority; (iv) any one of the following conditions are satisfied:
(A) there are no maturity mismatches among the balances of the participating accounts; (B) there are maturity mismatches among the balances of the participating accounts, but all balances of the participating accounts are either overnight or on demand and the Reporting Bank does not net any credit balance from the debit balances unless – (I) withdrawal is conditional upon the debit balances being repaid; and (II) the condition referred to in sub-paragraph (b)(iv)(B)(I) is stipulated in the contractual agreement54 with all counterparties to the cash pooling transaction; (v) the Reporting Bank charges or pays interest, fees or both interest and fees, based only on the net balance of all participating accounts. Derivative Transactions
2.13 Subject to paragraphs 2.22 and 2.23 of this Annex, for a derivative transaction
that is not covered by a qualifying bilateral netting agreement, a Reporting Bank must calculate the EM in respect of the derivative transaction using the following formula:
𝑒𝑥𝑝𝑜𝑠𝑢𝑟𝑒 𝑚𝑒𝑎𝑠𝑢𝑟𝑒 = 𝑎𝑙𝑝ℎ𝑎 × (𝑅𝐶 + 𝑃𝐹𝐸) where – (a) 𝑎𝑙𝑝ℎ𝑎 = 1.4; 53 While a Reporting Bank may use either an in-house or external legal counsel for the purposes of obtaining a written independent legal opinion, it should consider whether or not an in-house counsel opinion is appropriate. In the case of an in-house legal counsel, the Reporting Bank should ensure that the in-house legal counsel is independent of the parties originating transactions covered by the cash pooling arrangement. 54 Such withdrawal restrictions are intended to safeguard against the withdrawal of credit balances prior to a default, which would result in such exposure of the Reporting Bank not being captured by the leverage ratio.

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(b) 𝑅𝐶 = the replacement cost of the derivative transaction calculated using the following formula:
𝑅𝐶 = max (𝑉 − 𝐶𝑉𝑀𝑟 + 𝐶𝑉𝑀𝑝, 0) where – (i) 𝑉 = the current market value of the derivative transaction; (ii) 𝐶𝑉𝑀𝑟 = the cash variation margin received by the Reporting Bank in relation to the derivative transaction that meets the conditions set out in paragraph 2.18 of this Annex and that has not reduced 𝑉 under the Accounting Standards; and (iii) 𝐶𝑉𝑀𝑝 = the cash variation margin provided by the Reporting Bank in relation to the derivative transaction that meets the conditions set out in paragraph 2.18 of this Annex; and (c) 𝑃𝐹𝐸 = the potential future exposure of the derivative transaction calculated as – 𝑃𝐹𝐸 = 𝑚𝑢𝑙𝑡𝑖𝑝𝑙𝑖𝑒𝑟 × 𝐴𝑑𝑑𝑂𝑛𝑎𝑔𝑔𝑟𝑒𝑔𝑎𝑡𝑒 in accordance with Sections 3 and 4 of Annex 7D, except that the value of the multiplier referred to in paragraph 3.1(b) of Annex 7D must be fixed at one. To avoid doubt, a Reporting Bank may calculate the maturity factor used in the calculation of 𝐴𝑑𝑑𝑂𝑛𝑎𝑔𝑔𝑟𝑒𝑔𝑎𝑡𝑒, in accordance with paragraphs
3.36 to 3.39 of Annex 7D (i.e. the Reporting Bank may recognise the PFEreducing effect from the regular exchange of variation margin).
2.14 Subject to paragraphs 2.22 and 2.23 of this Annex, for a set of derivative
transactions that is covered by a qualifying bilateral netting agreement, a Reporting Bank must calculate the EM in respect of the netting set using the following formula:
𝑒𝑥𝑝𝑜𝑠𝑢𝑟𝑒 𝑚𝑒𝑎𝑠𝑢𝑟𝑒 = 𝑎𝑙𝑝ℎ𝑎 × (𝑅𝐶 + 𝑃𝐹𝐸) where – (a) 𝑎𝑙𝑝ℎ𝑎 = 1.4; (b) 𝑅𝐶 = the replacement cost of the derivative transactions in the netting set calculated using the following formula:
𝑅𝐶 = max (𝑉 − 𝐶𝑉𝑀𝑟 + 𝐶𝑉𝑀𝑝, 0) where – (i) 𝑉 = the current market value of the derivative transactions in the netting set; (ii) 𝐶𝑉𝑀𝑟 = the cash variation margin received by the Reporting Bank in relation to the derivative transactions in the netting set that meets

Monetary Authority of Singapore 4-23 the conditions set out in paragraph 2.18 of this Annex and that has not reduced 𝑉 under the Accounting Standards; and (iii) 𝐶𝑉𝑀𝑝 = the cash variation margin provided by the Reporting Bank in relation to the derivative transactions in the netting set that meets the conditions set out in paragraph 2.18 of this Annex; and (c) 𝑃𝐹𝐸 = the potential future exposure of the derivative transactions in the netting set calculated as – 𝑃𝐹𝐸 = 𝑚𝑢𝑙𝑡𝑖𝑝𝑙𝑖𝑒𝑟 × 𝐴𝑑𝑑𝑂𝑛𝑎𝑔𝑔𝑟𝑒𝑔𝑎𝑡𝑒 in accordance with Sections 3 and 4 of Annex 7D, except that the value of the multiplier referred to in paragraph 3.1(b) of Annex 7D must be fixed at one. To avoid doubt, a Reporting Bank may calculate the maturity factor used in the calculation of 𝐴𝑑𝑑𝑂𝑛𝑎𝑔𝑔𝑟𝑒𝑔𝑎𝑡𝑒, in accordance with paragraphs
3.36 to 3.39 of Annex 7D (i.e. the Reporting Bank may recognise the PFEreducing effect from the regular exchange of variation margin).
2.15 For the purposes of paragraphs 2.13(b) and 2.14(b) of this Annex, where there
is no accounting measure of exposure for certain derivative transactions because they are held completely off-balance sheet, the Reporting Bank must use the sum of positive fair values of these derivative transactions as the replacement cost.
2.16 A Reporting Bank must include the EM in respect of a written option in the
calculation of its TEM, even if it is assigned a zero E or EAD for the purposes of credit risk capital requirements under Part VII.
2.17 A Reporting Bank must not reduce the EM in respect of a derivative transaction
calculated in accordance with paragraph 2.13 or 2.14 of this Annex, whichever is applicable, by any collateral received from its counterparty in connection with the derivative transaction. To avoid doubt, the Reporting Bank must not net any collateral received against the derivative transaction even if such netting is permitted under the Accounting Standards or Part VII. Where collateral provided by the Reporting Bank in relation to a derivative transaction has reduced the value of its balance sheet assets in accordance with the Accounting Standards, the Reporting Bank must gross up the EM in respect of the derivative transaction by the amount of such collateral. A Reporting Bank must – (a) for the purposes of paragraphs 2.13(b) and 2.14(b) of this Annex, not reduce 𝑅𝐶 by any collateral received from its counterparty in connection with the derivative transaction; and (b) for the purposes of paragraphs 2.13(c) and 2.14(c) of this Annex, fix the value of the multiplier at one, but the Reporting Bank may calculate the maturity factor used in the calculation of 𝐴𝑑𝑑𝑂𝑛𝑎𝑔𝑔𝑟𝑒𝑔𝑎𝑡𝑒 in accordance with paragraphs 3.36 to 3.39 of Annex 7D (i.e. the Reporting Bank may recognise the PFE-reducing effect from the regular exchange of variation margin).

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This paragraph does not apply to the computation of the EM in respect of a derivative transaction calculated under paragraph 2.25 of this Annex.
2.18 In calculating the EM in respect of a derivative transaction, a Reporting Bank
may deem the cash portion of variation margin exchanged between counterparties as a form of pre-settlement payment (rather than a collateral) and reduce the EM in respect of a derivative transaction in accordance with paragraph 2.21 of this Annex, if all of the following conditions are met:
(a) for trades not cleared through a qualifying CCP, the cash received by the recipient counterparty is not segregated, i.e. there are no restrictions imposed on the recipient counterparty by law, regulation or any agreement, which restrict the recipient counterparty’s ability to use the cash received; (b) the variation margin is calculated and exchanged on a daily basis based on mark-to-market valuation of the derivative transaction, and the variation margin may be exchanged on the morning of the subsequent trading day based on the previous end-of-day market values; (c) the cash portion of the variation margin is received in a currency specified in – (i) the derivative contract; (ii) an agreement to net that covers the derivative transaction, with the counterparty or the CCP; or (iii) a credit support annex to an agreement to net mentioned in subparagraph (c)(ii); (d) the variation margin exchanged is the full amount necessary to fully extinguish the mark-to-market exposure of the derivative transaction subject to the margin threshold and minimum transfer amounts applicable to the counterparty; (e) the derivatives transaction and variation margin are covered by a single agreement to net between the counterparties in the derivatives transaction and the agreement to net – (i) explicitly stipulates that the counterparties agree to settle on a net basis any obligation covered by such an agreement to net, taking into account any variation margin received or provided if a credit event occurs involving either counterparty; (ii) is legally enforceable and effective in all relevant countries or jurisdictions within the meaning of paragraph 3.1(a) of Annex 7G, including in the event of default, insolvency, and bankruptcy; and (iii) does not contain a walkaway clause;

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(f) the Reporting Bank has obtained a written independent legal opinion55 confirming that the agreement to net meets the criteria in sub-paragraph (e).
2.19 For the purposes of paragraph 2.18(c) and (e) of this Annex, an agreement to
net is any agreement that provides a legally enforceable right of offset, and a Reporting Bank may deem a master agreement to net as a single agreement to net.
2.20 For the purposes of paragraph 2.18(d) of this Annex, where a margin dispute
arises, a Reporting Bank must not recognise any variation margin as the variation margin exchanged, other than the amount of non-disputed variation margin that has been exchanged.
2.21 Pursuant to paragraph 2.18 of this Annex, if all of the conditions in paragraph
2.18 of this Annex are met, a Reporting Bank may –
(a) reduce the replacement cost calculated in accordance with paragraph 2.13(b) or 2.14(b) of this Annex, whichever is applicable, by the amount of the cash portion of the variation margin received, if the positive markto-market value of the derivative transaction or transactions is not already reduced by the same amount of the cash portion of the variation margin received in accordance with the Accounting Standards; or (b) in respect of the cash portion of the variation margin provided to a counterparty, where the cash portion of the variation margin has been recognised as an asset in accordance with the Accounting Standards, deduct the resulting receivable in the calculation of its TEM, and instead include the cash portion of the variation margin provided in the calculation of 𝑅𝐶 via the term 𝐶𝑉𝑀𝑝. To avoid doubt, the Reporting Bank must not use the cash portion of the variation margin received by the Reporting Bank to reduce the potential future exposure calculated in accordance with paragraph 2.13(c) or 2.14(c) of this Annex.
2.22 Where a Reporting Bank, acting as a clearing member of a qualifying CCP, offers
clearing services for derivative transactions to a client, the Reporting Bank may exclude the EM in respect of the CCP trade exposures to the qualifying CCP in the calculation of the EM in respect of the derivative transaction if the Reporting Bank is not obligated, based on the contractual arrangements with the client, to reimburse the client for any losses suffered due to changes in the value of its derivative transactions in the event that the qualifying CCP defaults. To avoid doubt, a Reporting Bank must include the EM in respect of the CCP trade exposures based on the treatment for derivative transactions specified in this Annex, where – (a) the Reporting Bank, in acting as a clearing member of a qualifying CCP, is obligated to reimburse the client for any losses suffered due to changes in 55 While a Reporting Bank may use either an in-house or external legal counsel for the purposes of obtaining a written independent legal opinion, it should consider whether or not an in-house counsel opinion is appropriate. In the case of an in-house legal counsel, the Reporting Bank should ensure that the in-house legal counsel is independent of the parties originating transactions covered by the agreement to net.

Monetary Authority of Singapore 4-26 the value of the client’s transactions in the event that the qualifying CCP defaults; or (b) the CCP trade exposures are to a CCP that is not a qualifying CCP.
2.23 Where a Reporting Bank is a higher level client in a multi-level client structure,
and offers clearing services to a client for a derivative transaction that is cleared by a qualifying CCP, the Reporting Bank may exclude the EM in respect of the resulting CCP trade exposure to a clearing member or to an entity that is a higher level client to the Reporting Bank, in the calculation of the EM in respect of the derivative transaction if all of the following conditions are met:
(a) the Reporting Bank must confirm that the offsetting transaction in respect of the derivative transaction is identified by the qualifying CCP as a higher level client transaction; (b) the Reporting Bank must obtain a written independent legal opinion56 which concludes that – (i) the collateral is held by the qualifying CCP or the clearing member, or both, to support the offsetting transaction in respect of the derivative transaction, under one or more arrangements that prevent any losses to the Reporting Bank due to – (A) the default or insolvency of the clearing member; (B) the default or insolvency of other clients of the clearing member; and (C) the joint default or insolvency of the clearing member and any of its other clients; (ii) under the arrangements in sub-paragraph (b)(i), upon the insolvency of the clearing member, there is no legal impediment (other than the need to obtain a court order to which the client is entitled) to the transfer of the collateral belonging to clients of the defaulting clearing member to the qualifying CCP, to one or more other surviving clearing members, or to clients or their respective nominees; and (iii) the arrangements in sub-paragraph (b)(i) are binding on all relevant parties and legally enforceable in all relevant countries or jurisdictions within the meaning of paragraph 3.1(a) of Annex 7G; (c) the Reporting Bank must ensure that the arrangements in sub-paragraph (b)(i) do not cease to be enforceable and there continues to be no legal impediment under sub-paragraph (b)(ii); 56 While a Reporting Bank may use either an in-house or external legal counsel for the purposes of obtaining a written independent legal opinion, it should consider whether or not an in-house counsel opinion is appropriate. In the case of an in-house legal counsel, the Reporting Bank should ensure that the in-house legal counsel is independent of the parties originating transactions related to the Reporting Bank’s client clearing services.

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(d) the Reporting Bank must ensure that the laws, regulation, rules, contractual arrangements and administrative arrangements, that govern the derivative transaction between the Reporting Bank and the clearing member or higher level client, as the case may be – (i) provide that the offsetting transaction in respect of the derivative transaction with a clearing member that has defaulted, or an insolvent clearing member, will continue to be indirectly transacted through the qualifying CCP, or by the qualifying CCP, should the clearing member default or become insolvent; and (ii) allow for the Reporting Bank’s positions and collateral placed with the qualifying CCP to be transferred at market value unless the Reporting Bank requests to close out at market value; (e) the Reporting Bank must not be obligated, based on any contractual arrangements with its client, to reimburse the client for any losses suffered in the event that the qualifying CCP or the clearing member defaults.
2.24 For the purposes of paragraph 2.23(d) of this Annex, a Reporting Bank must
consider all of the following factors when assessing if the offsetting transaction in respect of the derivative transaction will continue to be indirectly transacted:
(a) whether there is a precedent for transactions being ported to another clearing member or the qualifying CCP; (b) whether there is any reason for the Reporting Bank to believe that the industry practice for such precedent to continue, will be changed. The Reporting Bank must not determine that the criteria in paragraph 2.23(d) of this Annex is met solely on the basis that there is no prohibition against the porting of client trades in any documentation provided by the qualifying CCP, including in rules imposed by or agreements entered into with, the qualifying CCP, that govern transactions transacted with or through the qualifying CCP.
2.25 Where a Reporting Bank offers clearing services for derivative transactions to a
client for derivative transactions that are cleared by a qualifying CCP or a CCP that is not a qualifying CCP, whether by acting as a clearing member of the CCP or by acting as a higher level client within a multi-level client structure, the Reporting Bank must determine the EM in respect of its exposure to the client as E calculated in accordance with paragraphs
1.1 to 1.3 and 2.4 to 5.4 of Annex 7D, subject to paragraph 2.26 of this Annex.
2.26 In determining the EM in respect of its exposure to the client, the Reporting
Bank must restrict the amount of initial margin received by the Reporting Bank from the client, that may be included in the values of 𝐶 and 𝑁𝐼𝐶𝐴 for the purposes of determining 𝑅𝐶 and 𝑃𝐹𝐸, to the amount for which the Reporting Bank records and maintains a separate book entry in relation to the client’s money or other assets received from each client under the laws governing the Reporting Bank’s handling or custody of client assets.
2.27 For the purposes of paragraphs 2.22 to 2.24 and 2.28 of this Annex, where a
Reporting Bank offers clearing services for a derivative transaction to an affiliate of the

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Reporting Bank, the Reporting Bank must consider the entity as a client if the entity is outside the regulatory scope of consolidation at the level at which the leverage ratio is being calculated. Where the entity is within the regulatory scope of consolidation at the level at which the leverage ratio is being calculated57, the Reporting Bank must include the EM in respect of the Reporting Bank’s trade exposure to the CCP resulting from the Reporting Bank’s provision of clearing services for the derivative transaction, calculated in accordance with paragraphs 2.22 to 2.24 of this Annex, in the calculation of the EM in respect of the derivative transaction.
2.28 Where a client enters directly into a derivative transaction with the CCP and the
Reporting Bank acting as a clearing member for the client to the CCP, guarantees the performance of its client’s CCP trade exposures to the CCP for the transaction, the Reporting Bank must calculate the EM in respect of the guarantee as an EM in respect of the derivative transaction as set out in paragraphs 2.13 to 2.21 of this Annex, as if the Reporting Bank had entered directly into the transaction with the client, including with regard to the receipt or provision of the cash portion of the variation margin.
2.29 For the purposes of paragraphs 2.22 to 2.24 and 2.27 of this Annex, CCP trade
exposures include initial margin posted to the CCP, irrespective of whether or not such margin is posted in a manner that makes it remote from the insolvency of the CCP. Written Credit Derivatives
2.30 For the purposes of paragraphs 2.31 to 2.39 of this Annex –
(a) “written credit derivative” refers to a credit derivative through which a Reporting Bank sells credit protection to a third party, and includes a credit default swap, a total return swap and an option where a Reporting Bank has the obligation to provide credit protection; and (b) “effective notional amount” in relation to a written credit derivative, means an amount obtained by adjusting the notional amount of the written credit derivative to reflect the true exposure of the written credit derivative that is leveraged or otherwise enhanced by the structure of the transaction.
2.31 In addition to the treatment for derivative transactions, which would include
written credit derivatives, set out in paragraphs 2.13 to 2.29 of this Annex, a Reporting Bank must include, subject to paragraphs 2.32 to 2.39 of this Annex, in the EM in respect of a written credit derivative, the effective notional amount of the written credit derivative, unless – (a) the written credit derivative is included in a transaction for which the Reporting Bank provides clearing services to a client by acting as a clearing member of a qualifying CCP, and the transaction meets the conditions in paragraph 2.22 of this Annex such that the Reporting Bank may exclude its CCP trade exposures in the calculation of the EM in respect of the derivative transaction; or 57 In such a case, the Reporting Bank’s trade exposure to the entity is eliminated in the course of consolidation, but the Reporting Bank still has a trade exposure to the CCP.

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(b) the written credit derivative is included in a transaction for which the Reporting Bank provides clearing services to a client by acting as a higher level client in a multi-level client structure, and the transaction meets the conditions in paragraph 2.23 of this Annex such that the Reporting Bank may exclude the EM in respect of the resulting trade exposures to – (i) the clearing member; or (ii) an entity that serves as a higher level client to the Reporting Bank, in the calculation of the EM in respect of the derivative transaction.
2.32 For the purposes of calculating the effective notional amount of a written credit
derivative, a Reporting Bank may reduce the effective notional amount by any negative change in fair value amount that has been incorporated into the calculation of CM with respect to the written credit derivative.
2.33 The Reporting Bank may further reduce the resulting amount (derived pursuant
to paragraph 2.32 of this Annex) by the effective notional amount of a purchased credit derivative on an identical reference name if – (a) the material terms which the credit protection purchased through the purchased credit derivative is subject to, are the same or more conservative than the material terms in the corresponding written credit derivative, such that the credit protection purchased will deliver a payment in all potential future states in which the corresponding written credit derivative is triggered; (b) the remaining maturity of the purchased credit derivative is equal to or greater than the remaining maturity of the written credit derivative; (c) the purchased credit derivative is not purchased from a counterparty whose credit quality is positively correlated with the value of the reference obligation of the written credit derivative. The absence of a legal connection between the counterparty and the underlying reference name of the written credit derivative does not preclude such a positive correlation; (d) where the effective notional amount of the written credit derivative is reduced by any negative change in fair value amount that has been incorporated into the calculation of the CM with respect to the written credit derivative, the Reporting Bank also reduces the effective notional amount of the purchased credit derivative by any resulting positive change in fair value that has been incorporated into the calculation of the CM with respect to the purchased credit derivative. Where the Reporting Bank does not reduce the effective notional amount of the purchased credit derivative by any resulting positive change in fair value that has been incorporated into the calculation of the CM with respect to the purchased credit derivative, the Reporting Bank may only offset the effective notional amount of the corresponding written credit derivative if the effective notional amount of the written credit derivative has not been reduced by

Monetary Authority of Singapore 4-30 any negative change in fair value that has been incorporated into the calculation of the CM with respect to the written credit derivative; and (e) the purchased credit derivative is not included in a transaction for which – (i) the Reporting Bank provides clearing services to a client (whether by acting as a clearing member of a qualifying CCP or by acting as a higher level client in a multi-level client structure); and (ii) the effective notional amount of the corresponding written credit derivative is excluded from the EM in respect of the written credit derivative in accordance with paragraph 2.31 of this Annex.
2.34 For the purposes of paragraph 2.33 of this Annex, in the case of a written credit
derivative which is an option where a Reporting Bank has the obligation to provide credit protection, the effective notional amount of such an option sold by the Reporting Bank may be offset by the effective notional amount of an option by which the Reporting Bank has the right to purchase credit protection, provided the conditions in paragraph 2.33(a) to (e) of this Annex are met.
2.35 To avoid doubt, a Reporting Bank may offset the effective notional amount of a
written credit derivative sold to a client by means of a credit derivative on an identical reference name purchased from a CCP, provided the conditions in paragraph 2.33(a) to (e) of this Annex are met.
2.36 For the purposes of paragraph 2.33(a) of this Annex, “material terms” include
the level of subordination, optionality, credit events, reference obligation and any other characteristics relevant to the valuation of the derivative. The criterion set out in paragraph 2.33(a) of this Annex would be met only where – (a) in the case of an option to provide credit protection, the strike price of the underlying purchased credit derivative is equal to or lower than the strike price of the underlying written credit derivative; (b) in the case of a written single name credit derivative, the purchased credit derivative references an obligation which – (i) ranks pari passu with the reference obligation of the written credit derivative; or (ii) is junior to the reference obligation of the written credit derivative, and a credit event on the reference obligation of the written credit derivative will always result in a credit event on the reference obligation of the purchased credit derivative; and (c) in the case of an exposure which is a tranche, the purchased credit derivative references an obligation with the same level of seniority as the reference obligation of the written credit derivative.
2.37 For the purposes of paragraph 2.33 of this Annex, 2 reference names are
considered identical only if they refer to the same legal entity. A Reporting Bank may offset the written credit derivatives on individual reference names with credit protection

Monetary Authority of Singapore 4-31 purchased through credit derivatives on a pool of reference names if the credit protection purchased is economically equivalent to purchasing credit protection separately on each of the individual reference names in the pool.58 If a Reporting Bank purchases credit protection on a pool of reference names through credit derivatives, but the credit protection does not cover the entire pool59, then the Reporting Bank must not offset the written credit derivatives on individual reference names. A Reporting Bank may offset written credit derivatives on a pool of reference names (or subset thereof) with credit protection purchased on a pool of reference names (or subset thereof) through credit derivatives provided that both instruments reference the same pool (or subset thereof) of reference names and the level of subordination of the reference obligations is identical under both instruments.
2.38 For the purposes of paragraph 2.33 of this Annex, where a Reporting Bank
purchases credit protection through a total return swap and records the net payments received as net income, but does not record offsetting deterioration in the value of the written credit derivative (either through reductions in fair value or by an addition to reserves) in its CM, the Reporting Bank must not recognise the credit protection for the purposes of offsetting the effective notional amounts related to written credit derivatives.
2.39 For the purposes of calculating the amount for potential future exposure as set
out in paragraphs 2.13(c) and 2.14(c) of this Annex, a Reporting Bank may exclude from the netting set for the potential future exposure calculation, the individual potential future exposure amount relating to a written credit derivative provided that – (a) such individual potential future exposure amount is not offset by the effective notional amount of a purchased credit derivative under paragraph 2.33 of this Annex; and (b) the effective notional amount of the written credit derivative is included in the calculation of the EM in respect of the written credit derivative under paragraph 2.31 of this Annex. SFTs
2.40 Where a Reporting Bank acts as a principal in an SFT, the Reporting Bank must
calculate the EM in respect of the SFT by adding – (a) the gross SFT assets recognised in accordance with the Accounting Standards (i.e. with no recognition of accounting netting of cash payables against cash receivables) with the following adjustments:
(i) the Reporting Bank must exclude the value of any collateral received under the SFT, where the Reporting Bank has recognised the collateral as an asset on its balance sheet; 58 For example, this would be the case if a Reporting Bank were to purchase credit protection on an entire securitisation structure. 59 This means that the credit protection covers only a subset of the pool, as in the case of an nth-to-default credit derivative or a securitisation tranche.

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(ii) the Reporting Bank may net the cash payables and cash receivables in the SFTs with the same counterparty if all of the following criteria are met:
(A) the SFTs have the same explicit final settlement date. An SFT with no explicit final settlement date but which can be unwound at any time by either party to the SFT would not satisfy this criterion; (B) the right to set off the amount owed to the counterparty with the amount owed by the counterparty is legally enforceable both currently in the normal course of business and in the event of default, insolvency, and bankruptcy; (C) the counterparties intend to settle net or settle simultaneously, or the SFTs are subject to a settlement mechanism that results in the functional equivalent of net settlement i.e. the cash flows of the SFTs are equivalent, in effect, to a single net amount on the settlement date; and (b) the SFT counterparty exposure calculated in accordance with the following formula:
(i) where the Reporting Bank has entered into a qualifying agreement to net with the counterparty – CESFT* = max {0, [∑(CESFT,i) - ∑(CSFT,i)]} where – (A) “CESFT*” refers to the SFT counterparty exposure; (B) “∑(CESFT, i)” refers to the total fair value of collateral and cash lent to the counterparty for all SFTs included in the qualifying agreement to net; and (C) “∑(CSFT, i)” refers to the total fair value of collateral and cash received from the counterparty for all SFTs included in the qualifying agreement to net; and (ii) where the Reporting Bank has not entered into a qualifying agreement to net with the counterparty, calculate for each SFT – CESFT, i* = max {0, [(CESFT, i) - (CSFT, i)]} where – (A) “CESFT, i *” refers to the SFT counterparty exposure for an SFT, i; (B) “CESFT, i” refers to the fair value of collateral and cash lent to the counterparty for the SFT, i; and

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(C) “CSFT, i” refers to the fair value of collateral and cash received from the counterparty for the SFT, i. However, a Reporting Bank may set CESFT, i* to zero where CESFT, i comprises only the cash lent to a counterparty, and the cash receivables arising from the cash lent to the counterparty is not eligible for the netting treatment set out in sub-paragraph (a).
2.41 For the purposes of paragraph 2.40(a) of this Annex, where the SFT assets are
subject to novation and cleared through a qualifying CCP, a Reporting Bank must use the final contractual exposure after the process of novation has been applied, in place of gross SFT assets. In calculating the final contractual exposure, a Reporting Bank may only net the cash payables and cash receivables with a qualifying CCP if the criteria in paragraph 2.40(a)(ii) of this Annex are met. A Reporting Bank must not recognise any other netting for the purposes of calculating the EM in respect of the SFT, even if such netting is permitted by a qualifying CCP.
2.42 For the purposes of paragraph 2.40(a)(ii)(C) of this Annex, cash flows of SFTs
are equivalent only if –
(a) the SFTs are settled through the same settlement system; (b) the settlement arrangements are supported by cash, or intraday credit facilities, or both, intended to ensure that settlement of the SFTs will occur by the end of the business day; and (c) any issues arising from the collateral leg of the SFTs do not interfere with the completion of the net settlement of the cash receivables and payables60 . Where there is a failure of the collateral leg of an SFT in such a mechanism at the end of the window for settlement in the settlement mechanism, a Reporting Bank must split out the SFT, including its matching cash leg, from the netting set and measure the EM in respect of the SFT on a gross basis.
2.43 For the purposes of paragraph 2.40(b) of this Annex, a qualifying agreement to
net is an agreement to net that meets all of the following criteria:
(a) be legally enforceable in each relevant country or jurisdiction within the meaning of paragraph 3.1(a) of Annex 7G upon the occurrence of an event of default and regardless of whether the counterparty is insolvent or bankrupt; (b) provide the non-defaulting party with the right to terminate and close out in a timely manner all SFTs under the agreement upon an event of default, including in the event of insolvency or bankruptcy of the counterparty; 60 This means that the failure of any single collateral leg in the settlement mechanism delays settlement of only the matching cash leg or creates an obligation to the settlement mechanism, supported by an associated credit facility.

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(c) provide for the netting of gains and losses on SFTs (including the value of any collateral) terminated and closed out under it so that a single net amount is owed by one party to the other; (d) allow for the prompt liquidation or setoff of collateral upon the event of default. Prior to treating an agreement to net as a qualifying agreement to net, a Reporting Bank must obtain a written independent opinion61 confirming that the agreement to net meets the criteria in this paragraph.
2.44 For the purposes of paragraph 2.40(b)(i) of this Annex, a Reporting Bank may
recognise netting across positions in the banking book and trading book only if – (a) all SFTs are marked to market daily; and (b) the collateral used in the SFTs is an eligible financial collateral in the banking book as set out in Annex 7H.
2.45 For the purposes of paragraph 2.40(b)(i)(B) and (ii)(B) of this Annex, in the
case of a triparty repo, the term “∑(CESFT,i)” or “CESFT, i”, as the case may be, includes collateral deposited at a triparty repo agent up to the amount effectively lent to the counterparty in the SFT, but excludes excess collateral that the Reporting Bank has deposited at a triparty repo agent but which has not been lent out.
2.46 Where a Reporting Bank has accounted for its SFT using sales accounting, the
Reporting Bank must reverse all sales-related accounting entries and calculate the EM in respect of the SFT in accordance with paragraph 2.40 of this Annex as if the SFT had been treated as a financing transaction in accordance with the Accounting Standards.
2.47 Where a Reporting Bank acting as an agent in an SFT62 provides an indemnity
or guarantee to a customer or counterparty for the difference between the value of the collateral or cash the customer or counterparty has lent and the value of the collateral the borrower has provided, the Reporting Bank must calculate the EM in respect of the SFT by applying only paragraph 2.40(b) of this Annex if – (a) the Reporting Bank does not own or control the underlying cash or security; and (b) the Reporting Bank’s exposure to the SFT is limited to the guaranteed difference between the value of the collateral or cash its customer or counterparty has lent and the value of the collateral the borrower has provided. 61 While a Reporting Bank may use either an in-house or external legal counsel for the purposes of obtaining a written independent legal opinion, it should consider whether or not an in-house counsel opinion is appropriate. In the case of an in-house legal counsel, the Reporting Bank should ensure that the in-house legal counsel is independent of the parties originating SFTs covered by the agreement to net. 62 The Reporting Bank generally provides an indemnity or guarantee to one of the 2 parties involved, and only for the difference between the value of the security or cash its customer or counterparty has lent and the value of the collateral the borrower has provided.

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2.48 Despite paragraph 2.47 of this Annex, a Reporting Bank must also include the
full amount of the collateral or cash in the EM in respect of the SFT where the Reporting Bank is economically exposed beyond the guaranteed difference to the underlying collateral or cash.63 This paragraph does not apply to client omnibus accounts that are used by agent lenders to hold and manage client collateral provided that client collateral is segregated from the Reporting Bank’s proprietary assets and the Reporting Bank calculates the exposure on a client-by-client basis.
2.49 Subject to paragraphs 2.47 and 2.48 of this Annex, where the Reporting Bank
acting as an agent in an SFT, does not provide an indemnity or guarantee to any of the parties involved in the SFT, the Reporting Bank may exclude the EM in respect of the SFT in the calculation of its TEM.
2.50 Where a Reporting Bank acting as an agent in an SFT provides an indemnity or
guarantee to both parties involved in the SFT, the Reporting Bank must calculate the EM in respect of the SFT by applying paragraphs 2.40 to 2.49 of this Annex separately for each party involved in the SFT. Off-balance Sheet Items
2.51 A Reporting Bank must calculate the EM in respect of an off-balance sheet item64
by multiplying the notional amount for the item with – (a) the applicable CCF set out in Annex 4D for an off-balance sheet item other than an off-balance sheet securitisation item; and (b) the applicable CCF set out in Annex 7C for an off-balance sheet securitisation item.
2.52 For the purposes of paragraph 2.51 of this Annex, the notional amount of an
off-balance sheet item refers to the amount which has been committed but is as yet undrawn. A Reporting Bank must measure the notional amount of an off-balance sheet item denominated in a foreign currency, based on the current exchange rate. The Reporting Bank must apply the CCF to the lower of the value of the unused committed credit line, and the value which reflects any possible constraining availability of the 63 For example, due to the Reporting Bank managing collateral received in the Reporting Bank’s name or on its own account rather than on the customer’s or borrower’s account (e.g. by on-lending or managing unsegregated collateral, cash or securities). 64 A Reporting Bank should record a commitment (as defined in Annex 2A) as an exposure for leverage ratio purposes on the date it enters into the legal contract or agreement with the obligor, except in the following cases:
(a) where the Reporting Bank faces operational constraints in recording the commitment immediately, such as checking that the legal contract or agreement is in order, such delay should not exceed 15 business days; (b) where the commitment is in respect of a credit facility to an obligor which is to be used for the purposes of repaying an existing credit facility issued by the Reporting Bank to the same obligor, such as for refinancing, the Reporting Bank should record the commitment on the date at which the existing credit exposure will be repaid. In the case where the amount for the commitment exceeds the outstanding amount to be repaid for the existing credit exposure, the Reporting Bank should recognise the difference on the date at which the legal contract or agreement or commitment is entered into by the Reporting Bank, subject to sub-paragraph (a).

Monetary Authority of Singapore 4-36 facility65. Where a Reporting Bank contends that the availability of a facility is constrained, the Reporting Bank must have sufficient line monitoring and management procedures to support this contention.
2.53 A Reporting Bank may reduce the EM in respect of an off-balance sheet item by
the amount of specific allowances and general allowances that have been set aside against the off-balance sheet item and which have reduced CET1 Capital, subject to the EM in respect of the off-balance sheet item not being less than zero. 65 An example is the existence of a ceiling on the potential lending amount which is related to an obligor’s reported cash flow.

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Annex 4D
CCF FOR OFF-BALANCE SHEET ITEMS OTHER THAN SECURITISATION ITEMS UNDER THE LEVERAGE RATIO
1.1 Table 4D-1 sets out the CCFs for off-balance sheet items other than
securitisation items.
1.2 Where a Reporting Bank undertakes to provide a commitment on another offbalance sheet item, a Reporting Bank must apply the lower of the applicable CCFs set out
in Table 4D-1
66
.
Table 4D-1 – CCF for off-balance sheet items
Description of Off-balance Sheet Item CCF
(a) Direct credit substitutes67 100%
(b) Sale and repurchase agreements and asset sales with recourse (other than SFTs), where the credit risk remains with the Reporting Bank 100% (c) Commitments with certain drawdown, including forward purchases, forward deposits, and partly paid shares and securities 100% (d) Credit substitutes which are not explicitly included in (a) to (c) 100% (e) Commitments to pay for unsettled purchases of financial assets, where the Reporting Bank treats the regular way purchase or sale of financial assets using settlement date accounting. The Reporting Bank may offset commitments to pay for unsettled purchases of financial assets by the amount of cash to be received for unsettled sales of financial assets where - (i) the financial assets are fair valued through the profit and loss account of the financial statements of the Reporting Bank; (ii) the Reporting Bank allocates the financial assets to its trading book; and (iii) the purchase or sale transactions of the financial assets are DvP transactions. 100% (f) Note issuance facilities and revolving underwriting facilities, regardless of the maturity of the underlying facility 50% 66 For example, if a Reporting Bank has a commitment to open short-term self-liquidating trade letters of credit arising from the movement of goods, a 20% CCF must be applied (instead of a 40% CCF). If a Reporting Bank has an unconditionally cancellable commitment to issue direct credit substitutes, a 10% CCF must be applied (instead of a 100% CCF). 67 For example, general guarantees of indebtedness (including standby letters of credit serving as financial guarantees for loans and securities), or acceptances (including endorsements with the character of acceptances).

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(g) Certain transaction-related contingent items68 50% (h) Other commitments, regardless of the maturity of the underlying facility, unless such other commitments fall within the scope of item (i) or (j) 40% (i) Self-liquidating trade-related contingent items69 arising from the movement of goods with an original maturity of below one year. This paragraph is applicable where the Reporting Bank is the issuing bank or the confirming bank, of such commitments. 20% (j) Commitments which are unconditionally cancellable at any time by the Reporting Bank without prior notice, or that effectively provide for automatic cancellation due to deterioration in an obligor’s creditworthiness 10%
1.3 Where the Reporting Bank makes a commitment to provide a loan that is to be
drawn down in a number of tranches, the Reporting Bank must classify the commitment under item (h) of Table 4D-1 and apply 40% CCF to the full undisbursed portion of the loan, regardless of whether the commitment falls within the scope of another item in
Table 4D-1.
1.4 For any item referred to in item (j) of Table 4D-1, where the Authority assesses
that a 10% CCF does not adequately capture the exposure arising from such a commitment, the Authority may direct the Reporting Bank to apply a higher CCF to the commitment. 68 For example, performance bonds, bid bonds, warranties or standby letters of credit related to particular transactions. 69 For example, documentary credits collateralised by the underlying shipments.

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PART V: OUTPUT FLOOR
5.1.1 A Reporting Bank must calculate its output floor as the sum of its credit RWA,
market RWA, and operational RWA, calculated using only standardised approaches, multiplied by the output floor calibration.
5.1.2 For the purposes of paragraph 5.1.1, “standardised approaches” refers to the
approaches set out in column (b) of Table 5-1, subject to paragraph 5.1.5. Where the Reporting Bank is using a nominated approach or a combination of nominated approaches, set out in column (a) of Table 5-1 to calculate the RWA for an exposure, for the purposes of paragraph 5.1.1, the Reporting Bank must calculate the RWA for the same exposure using the corresponding standardised approach or combination of standardised approaches, set out in column (b) of Table 5-1, subject to paragraph 5.1.5.
Table 5-1: Mapping of nominated approaches to standardised approaches
(a)
Nominated approach
(b)
Standardised approach
(A) SA(CR) SA(CR)
(B) IRBA SA(CR)
(C) look-through approach for equity investments in funds as set out in Division 5 of Part VII look-through approach, mandate-based approach, or fall-back approach for equity investments in funds as set out in Division 5 of
Part VII, except that under the look-through
approach, the Reporting Bank must calculate the credit risk-weighted exposure amounts of the underlying exposures of the fund using only the approaches listed in this column (D) mandate-based approach for equity investments in funds as set out in Division 5 of Part VII mandate-based approach for equity investments in funds as set out in Division 5 of
Part VII
(E) fall-back approach for equity investments in funds as set out in Division 5 of Part VII fall-back approach for equity investments in funds as set out in Division 5 of Part VII (F) SEC-ERBA SEC-ERBA (G) SEC-SA SEC-SA (H) applying a risk weight of 1250% for securitisation exposures as set out in paragraph 7.6.19 applying a risk weight of 1250% for securitisation exposures as set out in paragraph 7.6.19 (I) SEC-IRBA SEC-ERBA, SEC-SA, or applying a risk-weight of 1250%, in accordance with the hierarchy of these approaches as set out in paragraphs 7.6.16, 7.6.18 and 7.6.19 (J) SEC-IAA SEC-ERBA, SEC-SA, or applying a risk-weight of 1250%, in accordance with the hierarchy of these approaches as set out in paragraphs 7.6.16, 7.6.18 and 7.6.19 (K) SA-CCR SA-CCR (L) FC(SA) for CCR exposures arising from SFTs FC(SA)

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(a)
Nominated approach
(b)
Standardised approach
(M) FC(CA) for CCR exposures arising from SFTs FC(CA) (N) CCR internal models method for CCR exposures arising from OTC derivative transactions, exchange-traded derivative transactions or long settlement transactions SA-CCR (O) CCR internal models method for CCR exposures arising from SFTs FC(CA) (P) CCR internal models method for CCR exposures to a CCP SA-CCR (Q) use of VaR models to calculate CCR exposures arising from SFTs, as set out in Annex 7F FC(CA) (R) approach for calculating USTDvP RWA as set out in Subdivision 2 of Division 8 of Part VII approach for calculating UST-DvP RWA as set out in Sub-division 2 of Division 8 of Part VII (S) approach for calculating USTnon-DvP RWA as set out in Sub-division 3 of Division 8 of
Part VII
approach for calculating UST-non-DvP RWA as set out in Sub-division 3 of Division 8 of Part VII, except that in the case of a UST exposure arising from an unsettled non-DvP transaction referred to in paragraph 7.8.12, the Reporting Bank must not adopt the approach in paragraph 7.8.12(b) (T) SSA(MR) SSA(MR), except that the Reporting Bank must use the SEC-ERBA, SEC-SA, or apply a risk weight of 1250%, in accordance with the hierarchy of these approaches as set out in paragraphs 7.6.16, 7.6.18 and 7.6.19, to calculate the specific risk charge for securitisation exposures in the trading book (U) SA(MR) SA(MR), except that the Reporting Bank must use the SEC-ERBA, SEC-SA, or apply a riskweight of 1250%, in accordance with the hierarchy of these approaches as set out in paragraphs 7.6.16, 7.6.18 and 7.6.19, to set risk weights for securitisation exposures in the trading book (V) IMA SA(MR), except that the Reporting Bank must use the SEC-ERBA, SEC-SA, or apply a riskweight of 1250%, in accordance with the hierarchy of these approaches as set out in paragraphs 7.6.16, 7.6.18 and 7.6.19, to set risk weights for securitisation exposures in the trading book (W) BA-CVA BA-CVA, except that the Reporting Bank must calculate E or EAD using SA-CCR, FC(SA) or

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(a)
Nominated approach
(b)
Standardised approach
FC(CA), whichever is the applicable standardised approach corresponding to the nominated approach used by the Reporting Bank to calculate E or EAD in rows (K) to (Q) of this Table (X) SA-CVA SA-CVA (Y) approach for calculating CVA RWA as set out in paragraph 8.5.10 approach for calculating CVA RWA as set out in paragraph 8.5.10, except that the Reporting Bank must calculate E or EAD using SA-CCR, FC(SA) or FC(CA), whichever is the applicable standardised approach corresponding to the nominated approach used by the Reporting Bank to calculate E or EAD in rows (K) to (Q) of this Table (Z) SA(OR) SA(OR)
5.1.3 To avoid doubt, “standardised approaches” in paragraph 5.1.1 does not include
all of the following approaches:
(a) IRBA (including the use of the IRBA to calculate RWA under the lookthrough and mandate-based approaches for equity investments in funds); (b) SEC-IRBA and SEC-IAA (including the use of the SEC-IRBA or SEC-IAA to set risk weights or calculate the specific risk charge for securitisation exposures in the trading book); (c) IMA; (d) use of VaR models to calculate CCR exposures arising from SFTs; (e) CCR internal models method (including the use of the CCR internal models method to calculate exposures to a CCP).
5.1.4 To avoid doubt, with effect from 1 January 2025, a Reporting Bank’s market
RWA calculated using only standardised approaches referred to in paragraph 5.1.1 includes its Pillar 1 RWA surcharge calculated in accordance with paragraphs 8.1.39 to 8.1.41 and
12.5 times of its capital requirements for net short positions in funds calculated in
accordance with paragraph 8.1.11.
5.1.5 For the period from 1 July 2024 to 31 December 2024 (both dates inclusive),
a Reporting Bank must not apply rows (T) to (Y) of Table 5-1. Instead, where the Reporting Bank is using a nominated approach or a combination of nominated approaches, set out in column (a) of Table 5-2 to calculate the market RWA for an exposure, for the purposes of paragraph 5.1.1, the Reporting Bank must calculate the market RWA for the same exposure using the corresponding standardised approach or combination of standardised approaches, set out in column (b) of Table 5-2.

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Table 5-2: Mapping of nominated approaches relating to market RWA to standardised
approaches relating to market RWA for the period from 1 July 2024 to 31 December 2024 (both dates inclusive) (a) Nominated approach (b) Standardised approach (A) SA(MR) set out in Division 2 of Part VIII of MAS Notice 637 in force immediately before 1 July 2024 SA(MR) set out in Division 2 of Part VIII of MAS Notice 637 in force immediately before 1 July 2024, except that the Reporting Bank must use the SECERBA, SEC-SA, or apply a risk weight of 1250%, in accordance with the hierarchy of these approaches as set out in paragraphs 7.6.16, 7.6.18 and 7.6.19 of this Notice, to calculate the specific risk charge for securitisation exposures in the trading book (B) IMA set out in Division 3 of
Part VIII of MAS Notice
637 in force immediately before 1 July 2024
SA(MR) set out in Division 2 of Part VIII of MAS Notice 637 in force immediately before 1 July 2024, except that the Reporting Bank must use the SECERBA, SEC-SA, or apply a risk weight of 1250%, in accordance with the hierarchy of these approaches as set out in paragraphs 7.6.16, 7.6.18 and 7.6.19 of this Notice, to calculate the specific risk charge for securitisation exposures in the trading book (C) CVA standardised method set out in Section 2 of
Annex 7AI of MAS Notice
637 in force immediately before 1 July 2024
CVA standardised method set out in Section 2 of
Annex 7AI of MAS Notice 637 in force immediately
before 1 July 2024, except that the Reporting Bank must calculate E or EAD using SA-CCR, FC(SA) or FC(CA), whichever is the applicable standardised approach corresponding to the nominated approach used by the Reporting Bank to calculate E or EAD in rows (K) to (Q) of Table 5-1 (D) CVA advanced method set out in Section 3 of Annex 7AI of MAS Notice 637 in force immediately before 1 July 2024 CVA standardised method set out in Section 2 of
Annex 7AI of MAS Notice 637 in force immediately
before 1 July 2024, except that the Reporting Bank must calculate E or EAD using SA-CCR, FC(SA) or FC(CA), whichever is the applicable standardised approach corresponding to the nominated approach used by the Reporting Bank to calculate E or EAD in rows (K) to (Q) of Table 5-1
5.1.6 For the purposes of paragraph 5.1.1, “output floor calibration” refers to the
relevant percentage set out in Table 5-3, or such other higher percentage (in any case, not more than 100%) as the Authority may determine to be applicable to the Reporting Bank.
Table 5-3: Output floor calibration
Period Output floor calibration
From 1 July 2024 to 31 December 2024 50%
From 1 January 2025 to 31 December 2025 55%
From 1 January 2026 to 31 December 2026 60%
From 1 January 2027 to 31 December 2027 65%
From 1 January 2028 to 31 December 2028 70%
From 1 January 2029 onwards 72.5%

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PART VI: DEFINITION OF CAPITAL
Division 1: Common Equity Tier 1 Capital
Components of CET1 Capital
6.1.1 A Reporting Bank must ensure its CET1 Capital is calculated as the sum of the
following items, at both the Solo and Group levels:
(a) paid-up ordinary shares of the Reporting Bank that comply with the requirements in paragraph 6.1.2; (b) share premium, resulting from the issuance of ordinary shares which fall within sub-paragraph (a), if any; (c) retained earnings70, after deducting any interim or final dividends which have been declared by the Board of the Reporting Bank or any banking group entity on any class of shares and any interim losses incurred since the end of the last financial reporting period and may include any interim profits earned since the end of the last financial reporting period where the following conditions are met:
(i) every quarterly financial statement is prepared using the same accounting policies and practices applied in the preparation of the year-end financial statements, unless the change in the accounting policy or practice is in accordance with any statutory requirement; (ii) every quarterly financial statement and every significant transaction is reviewed in a timely manner by an external auditor; (iii) the external auditor of the Reporting Bank has not expressed a qualified opinion on any of the quarterly financial statements in the preceding 12 months of the end of the interim financial reporting period; (d) accumulated other comprehensive income and other disclosed reserves, other than revaluation surpluses on land and building assets, accumulated revaluation gains from investment properties and regulatory loss allowances; (e) 45% of revaluation surpluses on land and building assets and accumulated revaluation gains from investment properties, where the following conditions pertaining to revaluations are satisfied:
(i) the valuation of any land and building asset or investment property is obtained from a qualified property valuer and the increase in value 70 CET1 capital of the Group may include earnings of associates and joint ventures accounted for under the equity method, to the extent that they are reflected in retained earnings and other reserves of the group and not excluded by any of the regulatory adjustments set out in paragraph 6.1.5.

Monetary Authority of Singapore 6-2 is recorded as a revaluation surplus or gain in the financial statements; (ii) a new valuation from a qualified property valuer in respect of the land and building asset or investment property is obtained – (A) at least once every 3 years; or (B) where the value of the land and building asset or investment property has been substantially impaired by any event, whichever is earlier; (iii) impairment charges taken against any land and building asset or investment property are not netted against revaluation surplus or gain from any other asset; (iv) the external auditor of the Reporting Bank has not expressed a qualified opinion on the revaluation of any land and building asset or investment property; (f) paid-up ordinary shares issued by fully consolidated subsidiaries of the Reporting Bank and held by third party investors (i.e. minority interest) that meet the criteria for inclusion in CET1 Capital pursuant to paragraph 6.1.10; (g) regulatory adjustments set out in paragraph 6.1.5. Minimum Requirements for Paid-Up Ordinary Shares
6.1.2 For the purposes of paragraph 6.1.1(a), a Reporting Bank must not include a
paid-up ordinary share of the Reporting Bank as CET1 Capital unless – (a) the ordinary share represents the most subordinated claim in liquidation; (b) the entitlement of ordinary shareholders to a claim on the residual assets is proportional to their share of issued share capital, after all senior claims have been repaid in liquidation. In this regard, the claims of such holders are unlimited and variable (i.e. not fixed or capped); (c) the amount paid-up by ordinary shareholders is perpetual and is not repaid outside of liquidation. This excludes discretionary repurchases by the Reporting Bank or other means of reducing capital in a discretionary manner that is allowable under written law; (d) the Reporting Bank does not create an expectation at issuance that the ordinary shares will be bought back, redeemed or cancelled, nor do the contractual terms provide any feature that might give rise to such an expectation;

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(e) distributions in respect of ordinary shares (“distributions”) are only paid by the Reporting Bank to the extent that the Reporting Bank has profits distributable under written law. The level of distributions is not tied or linked to the amount paid-up at issuance, and is not subject to a contractual cap, except to the extent that the Reporting Bank is unable to pay distributions that exceed the level of profits distributable under written law. In the case where the Reporting Bank does not earn any distributable profit, the Reporting Bank may distribute dividends as long as the Reporting Bank meets the minimum capital ratios to which it is subject, and does not exceed any of the distribution constraints of the capital conservation and countercyclical buffers, as set out in Part IV. Accordingly, the Reporting Bank may pay dividends out of reserves available for distribution including those reserves accumulated in prior years, provided that it observes the minimum capital ratios and distribution constraints of the capital conservation and countercyclical buffers; (f) there are no circumstances under which distributions are obligatory and the non-payment of distributions is not an event of default; (g) distributions are only paid after all legal and contractual obligations have been met, and after payments on AT1 capital instruments and Tier 2 capital instruments have been made. In this regard, there are no preferential distributions, including in respect of other CET1 capital instruments; (h) the ordinary share takes the first and proportionately greatest share of any losses as they occur.71 In this regard, it absorbs losses on a goingconcern basis proportionately and pari passu with all other CET1 capital instruments; (i) the amount paid-up by ordinary shareholders is recognised as equity and not a liability, for the purposes of determining balance sheet insolvency; (j) the amount paid-up by ordinary shareholders is classified as equity under the Accounting Standards; (k) the ordinary share is directly issued and fully paid-up in cash, and purchase of the ordinary share is not directly or indirectly funded by the Reporting Bank72; (l) the amount paid-up by ordinary shareholders is not secured or covered by a guarantee of the Reporting Bank or any of its related corporations or other affiliates. In addition, the ordinary share is not subject to any other 71 To avoid doubt, in cases where capital instruments have a permanent write-down feature, this criterion is still deemed to be met by ordinary shares. 72 The Reporting Bank does not have to exclude funding to a borrower that purchases the ordinary shares of the Reporting Bank from regulatory capital where – (a) the Reporting Bank has full recourse to the borrower; and (b) the funding was not provided specifically for the purpose of purchasing the ordinary shares of the Reporting Bank.

Monetary Authority of Singapore 6-4 arrangement that legally or economically enhances the seniority of the claim; (m) the ordinary share is issued with the approval of the ordinary shareholders. The approval is either given directly by the ordinary shareholders or, if permitted by written law, given by the Board of the Reporting Bank or by other persons duly authorised by the ordinary shareholders; and (n) the ordinary share is clearly and separately disclosed on the Reporting Bank’s balance sheet.
6.1.3 In the case where the Reporting Bank issues non-voting ordinary shares as part
of CET1 Capital, the non-voting ordinary shares must be identical to the voting ordinary shares of the Reporting Bank in all respects, except the absence of voting rights.
6.1.4 The Reporting Bank must seek prior approval from the Authority if it intends to
include in CET1 Capital an instrument that has its dividends paid in anything other than cash or shares. Regulatory Adjustments Applied in the Calculation of CET1 Capital
6.1.5 A Reporting Bank must apply the following regulatory adjustments in the
calculation of CET1 Capital, at both the Solo and Group levels:
(a) the Reporting Bank must deduct goodwill, including any goodwill included in the valuation of investments in unconsolidated major stake companies, in the calculation of CET1 Capital.73 The Reporting Bank must deduct the full amount representing goodwill, net of any associated deferred tax liability that would be extinguished if the goodwill becomes impaired or is derecognised under the Accounting Standards; (b) the Reporting Bank must deduct intangible assets, including but not limited to copyright, patents and other intellectual property, in the calculation of CET1 Capital. The Reporting Bank must deduct the full amount representing intangible assets, net of any associated deferred tax liability that would be extinguished if the intangible assets become impaired or are derecognised under the Accounting Standards; (c) the Reporting Bank must deduct deferred tax assets that rely on the future profitability74 of the Reporting Bank or any banking group entity to be realised in the calculation of CET1 Capital.75 The Reporting Bank must assign, and must ensure that its banking group entity assigns, the relevant 73 To avoid doubt, goodwill included in the carrying amount of associates accounted for using the equity method should be deducted from CET1 Capital at the Group level. Such goodwill should be calculated by separating any excess of the acquisition cost over the Reporting Bank’s share of the net fair value of the identifiable assets and liabilities of the entity. 74 The test to assess whether a deferred tax asset is realisable over a one year period is not applicable. 75 Current year tax losses carried back to prior years or an overinstallment of tax may give rise to a claim or receivable from the government or relevant tax authority. Such amounts are usually classified as current tax assets for accounting purposes.

Monetary Authority of Singapore 6-5 sovereign risk weight to a claim or receivable from the government or relevant tax authority. To avoid doubt, a Reporting Bank must deduct any deferred tax assets associated with general allowances or TEP, maintained by the Reporting Bank in the calculation of CET1 Capital. At the Solo level, the Reporting Bank may net deferred tax assets with associated deferred tax liabilities prior to deducting deferred tax assets in the calculation of CET1 Capital, only if offsetting is permitted by the relevant tax authority. The Reporting Bank must exclude from deferred tax liabilities permitted to be netted against deferred tax assets, amounts that have been netted against the deduction of goodwill, intangible assets and defined benefit pension assets pursuant to sub-paragraphs (a), (b) and (i) respectively of this paragraph. The Reporting Bank must not permit the following for the purposes of calculating CET1 CAR, Tier 1 CAR or Total CAR at the Group level:
(i) intra-entity netting of deferred tax assets against deferred tax liabilities for any banking group entity incorporated or established outside Singapore; (ii) inter-entity netting of deferred tax assets against deferred tax liabilities. However, the Authority may permit sub-paragraphs (c)(i) and (c)(ii) if the Reporting Bank confirms in writing to the Authority that the deferred tax assets and deferred tax liabilities relate to taxes levied by the same tax authority, and that it has received written opinions from external auditors and legal advisors that the relevant tax authorities allow or would allow, deferred tax assets to be offset against the deferred tax liabilities. To avoid doubt, the Reporting Bank must exclude from deferred tax liabilities permitted to be netted against deferred tax assets, amounts that have been netted against the deduction of goodwill, intangible assets and defined benefit pension assets pursuant to sub-paragraphs (a), (b) and (i) respectively of this paragraph; (d) the Reporting Bank must derecognise the amount of cash flow hedge reserve that relates to the hedging of items that are not fair valued on the balance sheet, including projected cash flows, in the calculation of CET1 Capital. In this regard, positive amounts must be deducted, and negative amounts must be added back76; (e) in the case where the Reporting Bank has adopted the IRBA, the Reporting Bank must deduct any shortfall of the TEP relative to the total EL amount in the calculation of CET1 Capital. The Reporting Bank must deduct the full amount of such shortfall of the TEP, and must not reduce the amount by any tax effects that could be expected to occur if provisions were to rise to the level of total EL amount; 76 This adjustment specifically identifies and removes the element of the cash flow hedge reserve that gives rise to artificial volatility in common equity, as the reserve only reflects the fair value of the derivative, and not the change in the fair value of the hedged future cash flow.

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(f) the Reporting Bank must deduct any increase in equity resulting from a securitisation transaction, such as that which is associated with expected future margin income resulting in a gain-on-sale, in the calculation of CET1 Capital; (g) the Reporting Bank must deduct any exposures to credit-enhancing interest-only strips, net of – (i) specific allowances attributable to such exposures; and (ii) the amount that must be deducted in the calculation of CET1 Capital under sub-paragraph (f) that is attributable to such exposures; in the calculation of CET1 Capital; (h) the Reporting Bank must derecognise all unrealised fair value gains or losses, whether recognised through profit and loss or other comprehensive income, on financial liabilities arising from changes in the credit risk of the Reporting Bank or any banking group entity in the calculation of CET1 Capital. In this regard, positive amounts must be deducted, and negative amounts must be added back. In addition, all accounting valuation adjustments on derivative liabilities arising from changes in the credit risk of the Reporting Bank or any banking group entity must be derecognised in the calculation of CET1 Capital. The offsetting between valuation adjustments arising from changes in the credit risk of the Reporting Bank or any banking group entity and those arising from changes in the credit risk of the counterparties must not be allowed. In addition, any funding valuation adjustment applied by a Reporting Bank or any banking group entity must not have the effect of offsetting or reducing its unrealised fair value gains or losses on financial liabilities or accounting valuation adjustments on derivative liabilities arising from changes in the credit risk of the Reporting Bank or any banking group entity, for the purposes of calculating the amount to be derecognised in the calculation of CET1 Capital; (i) the Reporting Bank must fully recognise any defined benefit pension fund liabilities77, as included in the balance sheet, in the calculation of CET1 Capital. The creation of the liability on the balance sheet of the bank will result in a reduction in the bank’s common equity through a reduction in reserves and the Reporting Bank must ensure that no adjustment is applied in respect of the calculation of CET1 Capital. For each defined benefit pension fund that is an asset on the balance sheet, the Reporting Bank must deduct the asset in the calculation of CET1 Capital net of any associated deferred tax liabilities which would be extinguished if the asset becomes impaired or derecognised under the Accounting Standards. The Reporting Bank may, with the prior approval of the Authority, offset the 77 The liability, as recorded on the balance sheet in respect of a defined benefit pension fund, must be recognised in the calculation of CET1 Capital. The creation of the liability on the balance sheet of the bank will result in a reduction in the bank’s common equity through a reduction in reserves
and no adjustment must be applied in respect of the calculation of CET1 Capital.

Monetary Authority of Singapore 6-7 deduction of assets in the fund to which the Reporting Bank has unrestricted and unfettered access. The Reporting Bank must give such offsetting assets the risk weight they would receive as if they were owned directly by the Reporting Bank78; (j) the Reporting Bank must deduct all investments in the Reporting Bank’s own ordinary shares (including treasury shares, where applicable), whether held directly or indirectly by the Reporting Bank or any of its banking group entities, in the calculation of CET1 Capital, unless already derecognised under the Accounting Standards.79 If the Reporting Bank or any of its banking group entities is contractually obliged to purchase any of its own ordinary shares, the Reporting Bank must deduct such ordinary shares in the calculation of CET1 Capital. The Reporting Bank must apply this adjustment to exposures in both the banking book and trading book.80 Where a Reporting Bank acts as a market-maker for its own ordinary shares, it is not required to deduct such capital instruments in the calculation of CET1 Capital, until the Reporting Bank has offered to purchase the ordinary shares at an agreed price, and this offer has either been accepted or cannot be withdrawn.81 Gross long positions may be deducted net of short positions in the same underlying exposure, only if the short positions involve no counterparty credit risk. The Reporting Bank must look through holdings of index securities to deduct exposures to its own ordinary shares. The Reporting Bank may, with the prior approval of the Authority, use a conservative estimate82. If the Reporting Bank uses a conservative estimate, the Reporting Bank must ensure that the methodology for the estimate demonstrates that in no case will the actual exposure be higher than the estimated exposure. However, the Reporting Bank may net gross long positions in its own ordinary shares resulting from holdings of index securities against short positions in its own ordinary shares, which result 78 This adjustment addresses the concern that assets arising from pension funds may not be capable of being withdrawn and used for the protection of depositors and other creditors of the Reporting Bank. The concern is that their only value stems from a reduction in future payments into the fund. The treatment allows the Reporting Bank to reduce the deduction of the assets if it can address these concerns and show that it has unrestricted and unfettered access to these assets and the assets can be easily and promptly withdrawn from the fund. 79 This deduction is to avoid the double counting of the Reporting Bank’s own capital that arises from direct holdings, indirect holdings via index funds and potential future holdings as a result of contractual obligations to purchase own shares. 80 To avoid doubt, this adjustment does not cover ordinary shares held by the Reporting Bank or any of its banking group entities where – (a) the investments in the ordinary
shares are funded by third parties other than the Reporting Bank or any of its banking group entities (e.g. life insurance policyholders or other third party investors); (b) the risks and rewards associated with the investments in ordinary shares are borne primarily by the third parties; and (c) decisions to transact in the ordinary shares are made independently from the issuer of the capital instruments and in the interests of the third parties. 81 The purpose of the rule is to capture existing contractual arrangements that could lead to the Reporting Bank being required to make a purchase of its own capital instruments at a price agreed in the contract (e.g. a forward purchase or a written put option), such that the extent of the potential loss is known in advance. It was not intended to capture all potential contracts that a bank may enter to in the future. 82 If the Reporting Bank finds it operationally burdensome to look through and monitor its exact exposure to its own capital as a result of its holdings of index securities.

Monetary Authority of Singapore 6-8 from short positions in the same underlying index83. Despite the cancellation of MAS Notice 637 in force immediately before 1 July 2024, an approval granted under paragraph 6.1.3(o)(ii)(A) read with footnote 43 of that Notice, that was in force immediately before 1 July 2024, is treated as an approval granted under paragraph 6.1.5(j) of this Notice and every condition or restriction which the approval was subject to, that was in force immediately before 1 July 2024, will on and after that date continue to apply; (k) the Reporting Bank must deduct reciprocal cross holdings84 in the ordinary share capital of financial institutions that are designed to artificially inflate the capital position of the Reporting Bank in the calculation of CET1 Capital; (l) the Reporting Bank must deduct PE/VC investments held beyond the relevant holding periods set out in MAS Notice 630 in the calculation of CET1 Capital, unless otherwise approved by the Authority; (m) the Reporting Bank must deduct the full amount of capital deficits in subsidiaries that are financial institutions and that are subject to minimum prudential standards and supervision by a regulatory agency, and the pro rata share of capital deficits in associates that are financial institutions and that are subject to minimum prudential standards and supervision by a regulatory agency, in the calculation of CET1 Capital. In the event that a recapitalisation plan is in place or an irrevocable commitment has been given by other shareholders to make up the capital deficit, the Authority may approve a corresponding reduction in the amount of deductions in respect of such capital deficits; (n) the Reporting Bank must deduct valuation adjustments made in accordance with Annex 6C that exceed the valuation adjustments made under financial reporting standards in the calculation of CET1 Capital; (o) the Reporting Bank must deduct certain investments85 in the ordinary shares of unconsolidated financial institutions in which the Reporting Bank does not hold a major stake, in the calculation of CET1 Capital, in accordance with sub-paragraphs (o)(i) and (o)(ii):
(i) the amount of such investments to be deducted in the calculation of CET1 Capital must be the proportion of ordinary share holdings to total holdings of capital instruments and other TLAC liabilities not covered by the 5% threshold described in paragraph 6.3.10(c)(iii) to (iv), multiplied by the amount by which total holdings of capital instruments and other TLAC liabilities not covered by the 5% 83 In such cases, the short positions may involve counterparty credit risk, which will be subject to the relevant counterparty credit risk charge as set out in Part VII. 84 Provision of capital support by way of guarantee or other capital enhancements is treated as capital invested in financial institutions, and the quantum of such capital is the maximum amount that could be required to be paid out on any such guarantee. 85 Provision of capital support by way of guarantee or other capital enhancements is treated as capital invested in financial institutions, and the quantum of such capital is the maximum amount that could be required to be paid out on any such guarantee.

Monetary Authority of Singapore 6-9 threshold described in paragraph 6.3.10(c)(iii) to (iv) in aggregate and on a net long basis exceed 10% of the Reporting Bank’s common equity. In this sub-paragraph, the Reporting Bank’s common equity for the purposes of calculating the 10% threshold must be calculated after applying the regulatory adjustments set out in sub-paragraphs (a) to (n) to the sum of the elements set out in paragraph 6.1.1(a) to (f); (ii) the total holdings of capital instruments and other TLAC liabilities and ordinary share holdings referred to in sub-paragraph (o)(i) must be calculated as follows:
(A) direct, indirect and synthetic holdings of capital instruments and other TLAC liabilities must be included. For example, the Reporting Bank must look through holdings of index securities to determine the underlying holdings of capital and other TLAC liabilities. The Reporting Bank may, with the prior approval of the Authority, use a conservative estimate.86 If the Reporting Bank uses a conservative estimate, the Reporting Bank must ensure that the methodology for the estimate demonstrates that in no case will the actual exposure be higher than the estimated exposure. Despite the cancellation of MAS Notice 637 in force immediately before 1 July 2024, an approval granted under paragraph 6.1.3(o)(ii)(A) read with footnote 43 of that Notice, that was in force immediately before 1 July 2024, is treated as an approval granted under paragraph 6.1.5(o)(ii)(A) of this Notice and every condition or restriction which the approval was subject to, that was in force immediately before 1 July 2024, will on and after that date continue to apply; (B) the net long positions in both the banking book and trading book must be included. In this regard, the gross long position can be offset against the short position in the same underlying exposure, if the maturity of the short position either matches the maturity of the long position, or has a residual maturity of at least one year87,88,89. For other TLAC liabilities, it is the 86 If the Reporting Bank finds it operationally burdensome to look through and monitor its exact exposure to the capital or other TLAC liabilities of such entities as a result of its holdings of index securities. 87 For positions in the trading book, if the Reporting Bank has a contractual right or obligation to sell a long equity position at a specific point in time and the counterparty in the contract has an obligation to purchase the long equity position if the Reporting Bank exercises its right to sell, this point in time may be treated as the maturity of the long position, and the maturity of the long and short positions are deemed to be matched. 88 For a position hedged against market risk where the hedge does not qualify to offset the gross long position for the purposes of determining the amount to be deducted, the Reporting Bank may choose to include the long position in its calculation of market RWA, in addition to deducting the long position. Where the hedge qualifies to offset the gross long position, the Reporting Bank may choose to exclude both the gross long position and the hedge from its calculation of market RWA. 89 Where a Reporting Bank uses a short position in an index to hedge a long position, the Reporting Bank may, with the prior approval of the Authority, offset the long position with the portion of the index that is composed of the same underlying exposure that is being hedged only if (a) both the long position and the hedge are held in the trading book; (b) the positions are are accounted for at fair value; and
(c) the hedge is recognised as effective under the Reporting Bank’s internal control processes.

Monetary Authority of Singapore 6-10 gross long position that is to be included in paragraph 6.3.10(c) (iii) to (iv) and the net long position that is to be included in paragraph 6.1.5(o)(i) to (ii); (C) underwriting positions in capital instruments or other TLAC liabilities held for a period longer than 5 working days must be included, while those positions held for 5 working days or less can be excluded. The calculation of the period of 5 working days must begin on the date on which the Reporting Bank makes the payment to the issuer to purchase the capital instruments; (D) if the capital instrument of the entity in which the Reporting Bank has invested does not meet the criteria for CET1 Capital, AT1 Capital or Tier 2 Capital of the Reporting Bank, the capital instrument is to be considered as ordinary shares for the purposes of this regulatory adjustment90; (E) the maximum amount that could be paid out on any guarantee or capital enhancement, through which capital support is provided by the Reporting Bank to a financial institution must be included. The Reporting Bank must consult the Authority if there is uncertainty whether such guarantee or capital enhancement is to be considered as ordinary shares for the purposes of the regulatory adjustment; (F) certain investments where these have been made in the context of resolving or providing financial assistance to reorganise a distressed institution may be temporarily excluded with the approval of the Authority; (iii) the amount of total holdings of capital instruments and other TLAC liabilities not covered by the 5% threshold described in paragraph 6.3.10(c)(iii) to (iv) that do not exceed the 10% threshold calculated in accordance with sub-paragraph (o)(i) and are not deducted must continue to be risk-weighted91. For the application of risk-weighting, the amount of the holdings must be allocated on a pro rata basis between those below and those above the threshold; 90 To avoid doubt – (a) a capital instrument would be deemed to have met the criteria for CET1 Capital, AT1 Capital or Tier 2 Capital of the Reporting Bank, if it satisfies the applicable regulatory capital criteria imposed by a bank regulatory agency that has implemented the Basel III standards; (b) if the entity in which the Reporting Bank has invested is a financial institution that is subject to minimum prudential standards and supervision by a regulatory agency and the investment is not included as regulatory capital of the entity, the investment can be excluded for the purposes of this regulatory adjustment; and (c) if the entity in which the Reporting Bank has invested is a financial institution that is not a bank, the entity is subject to minimum prudential standards and supervision by a regulatory agency and the investment is not in the form of ordinary shares but is nevertheless recognised as Tier 1 capital (or its equivalent) or Tier 2 capital (or its equivalent) of the entity, the capital instrument should be considered
as an AT1 capital instrument or Tier 2 capital instrument, respectively, for the purposes of this regulatory adjustment. 91 Capital instruments in the banking book and trading book will thus be subject to the capital treatment as set out in Part VII and Part VIII, respectively.

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(p) the Reporting Bank must deduct certain investments92 in the ordinary shares of unconsolidated financial institutions in which the Reporting Bank holds a major stake (including insurance subsidiaries), in the calculation of CET1 Capital, in accordance with sub-paragraphs (p)(i) and (p)(ii), unless a deduction has been made pursuant to sub-paragraph (l):
(i) subject to paragraphs 6.1.6 and 6.1.7, the amount of such investments to be deducted in the calculation of CET1 Capital must be the amount by which such investments in aggregate exceed the threshold amount. In this sub-paragraph, the threshold amount is the lower of:
(A) 10% of the Reporting Bank’s common equity, calculated by applying the regulatory adjustments set out in subparagraphs (a) to (o) to the sum of elements set out in paragraph 6.1.1(a) to (f); (B) 15% of the Reporting Bank’s CET1 Capital93; (ii) the investments in aggregate referred to in sub-paragraph (p)(i) must be calculated as follows:
(A) direct, indirect and synthetic holdings must be included. The Reporting Bank must look through holdings of index securities to determine the underlying holdings of ordinary shares. The Reporting Bank may, with the prior approval of the Authority, use a conservative estimate.94 If the Reporting Bank uses a conservative estimate, the Reporting Bank must ensure that the methodology for the estimate demonstrates that in no case will the actual exposure be higher than the estimated exposure; (B) the net long positions in both the banking book and trading book must be included. In this regard, the gross long position can be offset against the short position in the same underlying exposure, if the maturity of the short position either matches 92 Provision of capital support by way of guarantee or other capital enhancements is treated as capital invested in financial institutions, and the quantum of such capital is the maximum amount that could be required to be paid out on any such guarantee. 93 This is equivalent to 17.65% of the Reporting Bank’s common equity after (a) applying all regulatory adjustments set out in paragraph 6.1.5(a) to (o); and (b) deducting in full such investments described in paragraph 6.1.5(p)(ii). 94 If the Reporting Bank finds it operationally burdensome to look through and monitor its exact exposure to the capital or other TLAC liabilities of such entities as a result of its holdings of index securities.

Monetary Authority of Singapore 6-12 the maturity of the long position or has a residual maturity of at least one year95,96,97; (C) underwriting positions held for a period longer than 5 working days must be included, while those positions held for 5 working days or less can be excluded; (D) if the capital instrument of the entity in which the Reporting Bank has invested does not meet the criteria for CET1 Capital, AT1 Capital or Tier 2 Capital of the Reporting Bank, the capital instrument is to be considered as ordinary shares for the purposes of this regulatory adjustment98; (E) the maximum amount that could be paid out on any guarantee or capital enhancement, through which capital support is provided by the Reporting Bank to a financial institution must be included. The Reporting Bank must consult the Authority if there is uncertainty whether such guarantee or capital enhancement is to be considered as ordinary shares for the purposes of the regulatory adjustment; (F) certain investments where these have been made in the context of resolving or providing financial assistance to reorganise a distressed institution may be temporarily excluded with the approval of the Authority; 95 For positions in the trading book, if the Reporting Bank has a contractual right or obligation to sell a long equity position at a specific point in time and the counterparty in the contract has an obligation to purchase the long equity position if the Reporting Bank exercises its right to sell, this point in time may be treated as the maturity of the long position, and the maturity of the long and short positions are deemed to be matched. 96 For a position hedged against market risk where the hedge does not qualify to offset the gross long position for the purposes of determining the amount to be deducted, the Reporting Bank may choose to include the long position in its calculation of market RWA, in addition to deducting the long position. Where the hedge qualifies to offset the gross long position, the Reporting Bank may choose to exclude both the gross long position and the hedge from its calculation of market RWA. 97 Where a Reporting Bank uses a short position in an index to hedge a long position, the Reporting Bank may, with the prior approval of the Authority, offset the long position with the portion of the index that is composed of the same underlying exposure that is being hedged only if (a) both the long position and the hedge are held in the trading book; (b) the positions are accounted for at fair value; and (c) the hedge is recognised as effective under the Reporting Bank’s internal control processes. 98 To avoid doubt – (a) a capital instrument would be deemed to have met the criteria for CET1 Capital, AT1 Capital or Tier 2 Capital of the Reporting Bank, if it satisfies the applicable regulatory capital criteria imposed by a bank regulatory agency that has implemented the Basel III standards; (b) if the entity in which the Reporting Bank has invested is
a financial institution that is subject to minimum prudential standards and supervision by a regulatory agency and the investment is not included as regulatory capital of the entity, the investment can be excluded for the purposes of this regulatory adjustment; and (c) if the entity in which the Reporting Bank has invested is a financial institution that is not a bank, the entity is subject to minimum prudential standards and supervision by a regulatory agency and the investment is not in the form of ordinary shares but is nevertheless recognised as Tier 1 capital (or its equivalent) or Tier 2 capital (or its equivalent) of the entity, the capital instrument should be considered as an AT1 capital instrument or Tier 2 capital instrument, respectively, for the purposes of this regulatory adjustment.

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(iii) the amounts of such investments that do not exceed the thresholds set out in sub-paragraph (p)(i) and are not deducted must be riskweighted at 250%; (q) the Reporting Bank must deduct any other item or class of items which the Authority may specify in writing to the Reporting Bank for the purposes of this paragraph; (r) in the case where the Reporting Bank does not have enough AT1 Capital to satisfy the required deductions set out in paragraph 6.2.6, the Reporting Bank must deduct the shortfall in the calculation of CET1 Capital.
6.1.6 Despite paragraph 6.1.5(p)(i), a Reporting Bank may, in the calculation of CET1
Capital at the Solo level, risk-weight an investment in the ordinary shares of an unconsolidated financial institution in which the Reporting Bank holds a major stake, at 400%, with the approval of the Authority.
6.1.7 Where a Reporting Bank risk-weights an investment at 400% in accordance
with paragraph 6.1.6 (“relevant investment”), the Reporting Bank must apply the regulatory adjustments in the calculation of CET1 Capital set out in paragraph 6.1.5(p) as follows:
(a) the Reporting Bank must include the relevant investment when calculating the “investments in aggregate” referred to in paragraph 6.1.5(p)(i) and (ii), the “threshold amount” referred to in paragraph 6.1.5(p)(i)(B)99 and the “threshold” referred to in 6.1.5(p)(iii) (where the threshold amount referred to in paragraph 6.1.5(p)(i)(B) is applicable); (b) the Reporting Bank must calculate the amount of investments to be deducted in the calculation of CET1 Capital as A−B, where – (i) A is the amount of investments that the Reporting Bank would have deducted in the calculation of CET1 Capital but for paragraph 6.1.6 and this paragraph; and (ii) B is the amount of the relevant investment; (c) the Reporting Bank must risk-weight the amount of investments (excluding the relevant investment) that do not exceed the thresholds calculated in accordance with paragraph 6.1.5(p)(i) and sub-paragraph (a), and that are not deducted, in accordance with paragraph 6.1.5(p)(iii).
6.1.8 The Authority may grant the approval mentioned in paragraph 6.1.6 subject to
such conditions or restrictions as the Authority may impose. The Authority will not normally grant such approval unless the Reporting Bank is able to demonstrate that such 99 For example, in determining the threshold amount referred to in paragraph 6.1.5(p)(i)(B) using the formula in footnote 93, the Reporting Bank should include the relevant investment as part of the investments to be deducted under that formula.

Monetary Authority of Singapore 6-14 investments can be realised and made available to the Reporting Bank during stress100, and the risk of loss of value in stress is adequately covered by capital required by riskweighting such investments at 400%101. Despite the cancellation of MAS Notice 637 in force immediately before 1 July 2024, an approval granted under paragraph 6.1.3A of that Notice, that was in force immediately before 1 July 2024, is treated as an approval granted under paragraph 6.1.6 of this Notice and every condition or restriction which the approval was subject to, that was in force immediately before 1 July 2024, will on and after that date continue to apply. [MAS Notice 637 (Amendment) 2024]
6.1.9 For the purposes of paragraph 6.1.5, indirect holdings of capital instruments
and other TLAC liabilities refer to exposures or parts of exposures that, if a direct holding loses its value, will result in a loss to the Reporting Bank substantially equivalent to the loss in value of the direct holding. Ordinary Shares Issued by Fully Consolidated Subsidiaries
6.1.10 A Reporting Bank must calculate the amount of minority interest that will be
recognised as consolidated CET1 Capital as follows (please refer to Annex 6A for an illustrative example):
(a) CET1 capital that is held by third party investors (“eligible minority interest”); less (b) the surplus CET1 Capital of the subsidiary attributable to the minority shareholders; where:
(i) eligible minority interest is such minority interest that arises from paid-up ordinary shares issued by a fully consolidated subsidiary of the Reporting Bank which is a bank (whether licensed or regulated in Singapore or outside Singapore)102,103 that if issued by the Reporting Bank, would meet all of the criteria for classification as ordinary shares for regulatory capital purposes, and includes retained 100 For example, if value of the investment is realised through a disposal of overseas subsidiary, the Reporting Bank should present a credible disposal plan, including an intent to dispose the subsidiary in stress and demonstrate that there are no impediments to execute the sale (including details such as whether the investment is an integral part of the Reporting Bank’s operations or franchise). [MAS Notice 637 (Amendment) 2024] 101 For example, this could be assessed by determining the sale value or “threshold price” at which there is no negative capital impact on the Reporting Bank’s CET1 CAR levels between pre and post-sale and whether the estimated sale value during stress exceeds this threshold price. The Reporting Bank should ensure that its valuation should be backed by reasonable assumptions. 102 For the purposes of this paragraph, any financial institution that is subject to the same minimum prudential standards and level of supervision as a bank may be considered to be a bank. 103 Minority interest in a subsidiary that is itself a bank is strictly excluded from the consolidated CET1 Capital if the Reporting Bank or any of its related corporations or other affiliates have entered into any arrangements to fund directly or indirectly, minority investment in the subsidiary whether through an SPE or through another vehicle or arrangement. The treatment outlined above is thus applicable only where all minority investments in that subsidiary represent genuine third party common equity contributions to the subsidiary.

Monetary Authority of Singapore 6-15 earnings and reserves of such a subsidiary that are attributable to third party investors; (ii) the surplus CET1 Capital of the subsidiary is calculated as the CET1 Capital of the subsidiary, minus the lower of:
(A) 9%104 of the subsidiary’s total RWA; and
(B) 9%105 of the consolidated RWA attributable to the subsidiary; and (iii) the surplus CET1 Capital of the subsidiary attributable to minority shareholders is calculated by multiplying the surplus CET1 Capital of the subsidiary calculated in sub-paragraph (b)(ii), by the percentage of eligible minority interest. To avoid doubt, a Reporting Bank must not include capital that has been issued to third party investors out of an SPE in CET1 Capital. 104 This represents the sum of the minimum CET1 CAR of 6.5% and Capital Conservation Buffer of 2.5% that is applicable to the banking group. Where the Reporting Bank is not designated by the Authority as a D-SIB, the ratios set out in paragraph 62 of “Basel III: A global regulatory framework for more resilient banks and banking systems” issued by the BCBS in December 2010 (last revised in June 2011), will apply (i.e. 7% of the subsidiary’s total RWA, which represents the sum of the minimum CET1 CAR of 4.5% and Capital Conservation Buffer of 2.5%). 105 This represents the sum of the minimum CET1 CAR of 6.5% and Capital Conservation Buffer of 2.5% that is applicable to the banking group. Where the Reporting Bank is not designated by the Authority as a DSIB, the ratios set out in paragraph 62 of “Basel III: A global regulatory framework for more resilient banks and banking systems” issued by the BCBS in December 2010 (last revised in June 2011), will apply (i.e. 7% of the consolidated RWA attributable to the subsidiary, which represents the sum of the minimum CET1 CAR of 4.5% and Capital Conservation Buffer of 2.5%).

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Division 2: Additional Tier 1 Capital
Components of AT1 Capital
6.2.1 A Reporting Bank must ensure that its AT1 Capital is calculated as the sum of
the following items, at both the Solo and Group levels:
(a) capital instruments issued by the Reporting Bank which comply with the requirements in paragraph 6.2.2, and are not included in CET1 Capital; (b) share premium, resulting from the issuance of capital instruments which fall within sub-paragraph (a), if any; (c) capital instruments issued by fully consolidated subsidiaries of the Reporting Bank and held by third party investors that meet the criteria for inclusion in AT1 Capital pursuant to paragraphs 6.2.8 and 6.2.9 , and are not included in CET1 Capital; (d) regulatory adjustments set out in paragraph 6.2.6. Minimum Requirements for AT1 Capital Instruments
6.2.2 For the purposes of paragraph 6.2.1(a), a Reporting Bank must not include a
capital instrument of the Reporting Bank as AT1 Capital unless – (a) the capital instrument is issued and fully paid-up in cash. The Reporting Bank must ensure that only the net proceeds received from the issuance of the capital instrument may be included as capital; (b) the capital instrument is subordinated to depositors and general creditors of the Reporting Bank, and holders of Tier 2 capital instruments issued by the Reporting Bank; (c) the paid-up amount is not guaranteed by the Reporting Bank or any of its related corporations or other affiliates, or covered under any other arrangement that legally or economically enhances the seniority of the claim vis-a-vis the Reporting Bank’s creditors106; (d) the holder of the capital instrument waives his right, if any, to set off any amounts he owes the Reporting Bank against any subordinated amount owed to him due to the capital instrument and commits to return any setoff amounts or benefits received to the liquidator; (e) the subordination provisions of the capital instrument are governed by the laws of Singapore and for capital instruments issued on or after 1 January 2017, the agreements governing the issuance of the capital instruments 106 For example, where the Reporting Bank issues AT1 capital instruments via an SPE and provides support to the SPE (e.g. by contributing a reserve), the provision of support will constitute an enhancement and the capital instrument will be regarded as failing to meet this requirement.

Monetary Authority of Singapore 6-17 must provide that any dispute arising out of or in connection with the provisions governed by the laws of Singapore will be determined exclusively by the courts of Singapore. Where the capital instrument is to be subject to the laws of a country or jurisdiction other than Singapore, the Reporting Bank must satisfy itself that all the relevant conditions specified in this paragraph are met under the laws of that country or jurisdiction; (f) the capital instrument is perpetual. In this regard, there must be no maturity date, and there must be no step-ups or other provisions that mandate or create an incentive for the Reporting Bank to redeem the capital instrument107. The Reporting Bank must not create an expectation that the call option will be exercised; (g) subject to paragraph 6.2.3, the capital instrument is callable at the option of the Reporting Bank only after a minimum of 5 years from the issue date, subject to the following requirements:
(i) a call option may be exercised only with the prior approval of the Authority; (ii) the Reporting Bank must not create an expectation that the call option will be exercised108; (iii) the Reporting Bank must not exercise a call option unless – (A) the capital instrument is replaced by the Reporting Bank with capital of the same or better quality, and the replacement of this capital is done at conditions which are sustainable for the income capacity of the Reporting Bank109; or (B) the Reporting Bank demonstrates that its capital position is well above the minimum capital requirements after the call option is exercised; (h) any repayment of principal (e.g. through repurchases or redemptions) is done only with the prior approval of the Authority. The Reporting Bank must not assume or create any expectation that approval will be given by 107 For example, the following may be considered as an incentive to redeem:
(a) a call option combined with an increase in the credit spread of the capital instrument if the call option is not exercised; (b) a call option combined with a requirement or an investor option to convert the capital instrument into ordinary shares if the call is not exercised; or (c) a call option combined with a change in reference rate where the credit spread over the second reference rate is greater than the initial payment rate less the swap rate (i.e. the fixed rate paid to the call date to receive the second reference rate). To avoid doubt, a conversion from a fixed rate to a floating rate or vice versa in combination with a call option without any increase in credit spread is not in itself be deemed an incentive to redeem. 108 For example, the Authority is not likely to grant approval for redemption where a Reporting Bank calls a capital instrument and replaces it with another capital instrument that is more costly (e.g. with a higher credit spread). 109 Replacement issues can be concurrent with, but not after the capital instrument is called.

Monetary Authority of Singapore 6-18 the Authority. Without prejudice to any other matter that the Authority may consider relevant, the Authority may in determining whether to grant its approval, consider whether the Reporting Bank's capital is likely to remain adequate after redemption; (i) with regard to the dividend or coupon payable on the capital instrument – (i) the Reporting Bank has full discretion at all times to cancel distributions or payments, and the Reporting Bank must ensure that its AT1 instruments do not contain dividend pushers 110; (ii) any cancellation of dividend or coupon is not an event of default; (iii) the Reporting Bank has full access to cancelled payments to meet obligations as they fall due; and (iv) any cancellation of dividend or coupon does not impose restrictions on the Reporting Bank111, except in relation to distributions to ordinary shareholders; (j) any dividend or coupon to be paid under the capital instrument is only paid to the extent that the Reporting Bank has profits distributable under written law; (k) the capital instrument does not have a credit sensitive dividend feature, i.e. a dividend or coupon that is reset periodically, based in whole or in
part on the credit standing of the Reporting Bank or any banking group
entity;
(l) the capital instrument does not contribute to liabilities exceeding assets, if such a balance sheet test forms part of the law of insolvency; (m) where the capital instrument is classified as a liability under the Accounting Standards, it must have principal loss absorption features through – (i) a provision under which it converts to ordinary shares if the CET1 CAR of the Reporting Bank falls to 7% or below; or 110 A capital instrument with a dividend pusher obliges the Reporting Bank to make a dividend or coupon payment on the instrument, if it has made a payment on another (typically more junior) capital instrument or share. This obligation is inconsistent with the requirement for the Reporting Bank to have full discretion at all times to cancel distributions or payments. Furthermore, the cancellation of distributions or payments means that these payments are extinguished without requiring the Reporting Bank to make distributions or payments in kind. To avoid doubt, “dividend stoppers” are not prohibited, provided that the Reporting Bank retains full discretion at all times to cancel distributions or payments. A capital instrument with a dividend stopper stops the Reporting Bank from making a dividend on its ordinary shares or other AT1 capital instruments if a dividend or coupon payment is not paid on its AT1 capital instruments. 111 For example, restrictions which impede the Reporting Bank’s ability to restructure or improve its capital position.

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(ii) a write-down mechanism that allocates losses to the capital instrument if the CET1 CAR of the Reporting Bank falls to 7% or below. The write-down must have the following effects:
(A) it reduces the amount claimable by the holder of the capital instrument in the liquidation of the Reporting Bank; (B) it reduces the amount to be repaid when a call option is exercised; (C) it partially or fully reduces dividend or coupon payments on the capital instrument; Under both sub-paragraphs (m)(i) and (m)(ii), the conversion or writedown must generate CET1 Capital under the Accounting Standards and the capital instrument will only receive recognition as AT1 Capital up to the minimum level of CET1 generated by a full conversion or write-down of the capital instrument. In addition, the aggregate amount to be converted or written down for all such capital instruments must be at least the amount needed to immediately return the Reporting Bank’s CET1 CAR to 7% or, if this is not possible, the full principal value of the capital instruments. Where a Reporting Bank issues the capital instrument in a foreign currency, the Reporting Bank must revalue the capital instrument periodically (at least monthly) in terms of Singapore dollars at the prevailing exchange rates. Where the Reporting Bank intends to use a swap to hedge the foreign exchange exposure arising from the foreign currency capital instrument, it must consult the Authority on the capital treatment applicable to the hedge prior to such use; (n) the Reporting Bank has ensured that – (i) neither the Reporting Bank nor any of its banking group entities or associates has purchased the capital instruments; and (ii) the Reporting Bank has not directly or indirectly funded the purchase of the capital instrument; (o) the capital instrument does not have any feature that hinders recapitalisation, such as provisions that require the issuer to compensate investors if a new instrument is issued at a lower price during a specified time frame. Where there is a dividend stopper within the terms and conditions of the AT1 capital instrument, the Reporting Bank must ensure that such a feature does not hinder the recapitalisation of the Reporting Bank112; 112 For example, a dividend stopper on an AT1 capital instrument must not (a) attempt to stop payment on another capital instrument where such payments are not fully discretionary; (b) prevent distributions to ordinary shareholders for a period that extends beyond the point in time that dividend or coupon payments on the AT1 capital instrument are resumed; or (c) impede the normal operation of the Reporting Bank or any restructuring activity such as acquisitions or disposals.

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(p) if the capital instrument is not issued out of an operating entity or the holding company of the Reporting Bank (e.g. issued out of a SPE), the proceeds from the issuance of the capital instrument must be immediately available without limitation to an operating entity or the holding company of the Reporting Bank in a form which at the minimum meets all of the other requirements set out in this paragraph, for inclusion as AT1 Capital; (q) the main features of the capital instrument are disclosed clearly and accurately to the investors of the capital instruments; (r) the agreement governing the issuance of the capital instrument must not be changed without the prior approval of the Authority where such proposed changes could impact its eligibility as AT1 Capital; [MAS Notice 637 (Amendment) 2025] (s) the agreement governing the issuance of the capital instrument contain provisions which ensure its loss absorbency at the point of non-viability that meet the requirements set out in Annex 6B; [MAS Notice 637 (Amendment) 2025] (t) subject to sub-paragraph (v), the Reporting Bank sells the capital instrument to a person that is not a retail investor in Singapore112A; [MAS Notice 637 (Amendment) 2025] (u) subject to sub-paragraph (v), where the Reporting Bank sells the capital instrument to an intermediary, the agreement governing the sale and purchase of the capital instrument provides that the intermediary must not sell the capital instrument to a person that is a retail investor in Singapore112B; and [MAS Notice 637 (Amendment) 2025] 112A To avoid doubt, this requirement applies whether the Reporting Bank sells the capital instrument to an investor or an intermediary. [MAS Notice 637 (Amendment) 2025] 112B To avoid doubt – (a) nothing in paragraph 6.2.2(u) shall be construed to affect the requirements of any other written law, including Part 13 of the Securities and Futures Act 2001; and (b) the Reporting Bank is not required to ensure that the sale of capital instruments by persons (other than the Reporting Bank), complies with paragraph 6.2.2(t) to (v). [MAS Notice 637 (Amendment) 2025]

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(v) where the capital instrument is part of an issue, each capital instrument in that issue is sold by the Reporting Bank in compliance with the requirements in sub-paragraphs (t) and (u)112C. [MAS Notice 637 (Amendment) 2025] 6.2.2A Despite paragraph 6.2.2(t) to (v), a Reporting Bank may include a capital instrument as AT1 Capital, if the capital instrument was included as AT1 Capital immediately before 1 January 2026. [MAS Notice 637 (Amendment) 2025] 6.2.2B In paragraph 6.2.2(u), “intermediary” means – (a) any entity holding a capital markets services licence granted by the Authority under section 86 of the Securities and Futures Act 2001; (b) a person who is exempted under section 99(1)(a), (b), (c), (d), (f) or (g) of the Securities and Futures Act 2001 to carry on business in a regulated activity; (c) a person specified in the Second Schedule to the Securities and Futures (Licensing and Conduct of Business) Regulations who is exempted from
section 82(1) of the Securities and Futures Act 2001;
(d) a collective investment scheme or closed-end fund that is a legal person under the laws of the country or jurisdiction in which it is constituted; or (e) a person acting as a trustee of a collective investment scheme or closedend fund that is constituted as a trust. [MAS Notice 637 (Amendment) 2025] 6.2.2C For the purposes of determining whether a person, collective investment scheme or closed-end fund is an intermediary mentioned in paragraph 6.2.2B(c) or (d), as the case may be, a Reporting Bank may rely on written declarations or representations made by the person, collective investment scheme or closed-end fund. [MAS Notice 637 (Amendment) 2025]
6.2.3 The Authority may grant approval for redemption of a capital instrument within
the first 5 years from the issue date where – (a) there is a change in tax status of the capital instrument due to changes in 112C For example, if the Reporting Bank issued S$100 million of capital instruments to investors in Singapore, of which S$90 million of capital instruments are sold to an accredited investor or institutional investor, and S$10 million of capital instruments are sold to retail investors in Singapore, the issue does not comply with paragraph 6.2.2(v). As such, the entire issue of S$100 million must not be included as AT1 Capital of the Reporting Bank. [MAS Notice 637 (Amendment) 2025]

Monetary Authority of Singapore 6-22 applicable tax laws of the country or jurisdiction in which the capital instrument was issued; or (b) there is a change relating to the recognition of the capital instrument as capital for calculating Tier 1 CAR and Total CAR, and provided that the requirements set out in paragraph 6.2.2(g)(i) to (iii) are met. The Authority may, in determining whether to grant approval, consider whether the Reporting Bank was in a position to anticipate the event at the issuance of the capital instrument.
6.2.4 For the purposes of paragraph 6.2.1(b), a Reporting Bank must not include any
share premium that is not eligible for inclusion in CET1 Capital, in AT1 Capital, unless the shares giving rise to the share premium comply with the requirements in paragraph 6.2.2.
6.2.5 The Reporting Bank must seek prior approval from the Authority if it intends to
include in AT1 Capital an instrument that has its dividends or coupons paid in anything other than cash or shares. Regulatory Adjustments Applied in the Calculation of AT1 Capital
6.2.6 A Reporting Bank must apply the following regulatory adjustments in the
calculation of AT1 Capital, at both the Solo and Group levels:
(a) the Reporting Bank must deduct all investments in the Reporting Bank’s own AT1 capital instruments, whether held directly or indirectly by the Reporting Bank or any of its banking group entities, in the calculation of AT1 Capital, unless already derecognised under the Accounting Standards.113 If the Reporting Bank or any of its banking group entities is contractually obliged to purchase any of its own AT1 capital instruments, the Reporting Bank must deduct such AT1 capital instruments in the calculation of AT1 Capital. The Reporting Bank must apply this adjustment to exposures in both the banking book and trading book.114 Where a Reporting Bank acts as a market-maker for its own AT1 capital instruments, it is not required to deduct such capital instruments in the calculation of AT1 Capital, until the Reporting Bank has offered to purchase the AT1 capital instruments at an agreed price, and this offer has either been accepted or cannot be withdrawn.115 113 This deduction is to avoid the double counting of the Reporting Bank’s own capital that arises from direct holdings, indirect holdings via index funds and potential future holdings, as a result of contractual obligations to purchase its own AT1 capital instruments. 114 To avoid doubt, this adjustment does not cover AT1 capital instruments held by the Reporting Bank or any of its banking group entities where – (a) the investments in the AT1 capital instruments are funded by third parties other than the Reporting Bank or any of its banking group entities (e.g. life insurance policyholders or other third party investors); (b) the risks and rewards associated with the investments in AT1 capital instruments are borne primarily by the third parties; and (c) decisions to transact in the AT1 capital instruments are made independently from the issuer of the capital instruments and in the interests of the third parties. 115 The purpose of the rule is to capture existing contractual arrangements that could lead to the Reporting Bank being required to make a purchase of its own capital instruments at a price agreed in the contract

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Gross long positions may be deducted net of short positions in the same underlying exposure, only if the short positions involve no counterparty credit risk. The Reporting Bank must look through holdings of index securities to deduct exposures to its own AT1 capital instruments.116 The Reporting Bank may, with the prior approval of the Authority, use a conservative estimate.117 If the Reporting Bank uses a conservative estimate, the Reporting Bank must ensure that the methodology for the estimate demonstrates that in no case will the actual exposure be higher than the estimated exposure. However, the Reporting Bank may net gross long positions in its own AT1 capital instruments resulting from holdings of index securities against short positions in its own AT1 capital instruments, which result from short positions in the same underlying index118 ; (b) the Reporting Bank must deduct reciprocal cross holdings in the AT1 capital instruments119 of financial institutions that are designed to artificially inflate the capital position of the Reporting Bank in the calculation of AT1 Capital; (c) the Reporting Bank must deduct certain investments in the AT1 capital instruments of unconsolidated financial institutions in which the Reporting Bank does not hold a major stake, in the calculation of AT1 Capital120, in accordance with sub-paragraphs (c)(i) and (c)(ii):
(e.g. a forward purchase or a written put option), such that the extent of the potential loss is known in advance. It was not intended to capture all potential contracts that a bank may enter to in the future. 116 For both investments in own shares and investments in unconsolidated financial institutions that result from holdings of index securities, a Reporting Bank is permitted to net gross long positions against short positions in the same underlying index as long as the maturity of the short position matches the maturity of the long position or has a residual maturity of at least one year. 117 If the Reporting Bank finds it operationally burdensome to look through and monitor its exact exposure to its own capital as a result of its holdings in index securities. 118 In such cases, the short positions may counterparty credit risk, and be subject to the relevant counterparty credit risk charge as set out in Part VII. 119 To avoid doubt – (a) a capital instrument would be deemed to have met the criteria for AT1 Capital of the Reporting Bank, if it satisfies the applicable regulatory capital criteria imposed by a bank regulatory agency that has implemented the Basel III standards; and (b) if the entity in which the Reporting Bank has invested is a financial institution that is not a bank, the entity is subject to minimum prudential standards and supervision by a regulatory agency and the investment is not in the form of ordinary shares but is nevertheless recognised as Tier 1 capital (or its equivalent) of the entity, the capital instrument must be considered as an AT1 capital instrument for the purposes of this regulatory adjustment. 120 To avoid doubt – (a) a capital instrument would be deemed to have met the criteria for AT1 Capital of the Reporting Bank, if it satisfies the applicable regulatory capital criteria imposed by a bank regulatory agency that has implemented the Basel III standards; (b) if the entity in which the Reporting Bank has invested is a financial institution that is subject to minimum prudential standards and supervision by a regulatory agency and the investment is not included as regulatory capital of the entity, the investment can be excluded for the purposes of this regulatory adjustment; and (c) if the entity in which the Reporting Bank has invested is a financial institution that is not a bank, the entity is subject to minimum prudential standards and supervision by a regulatory agency and the investment is not in the form of ordinary shares but is nevertheless recognised as Tier 1 capital (or its equivalent) of the entity, the capital instrument must be considered as an AT1 capital instrument for the purposes of this regulatory adjustment.

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(i) the amount of such investments to be deducted in the calculation of AT1 Capital must be the proportion of AT1 capital instrument holdings to total holdings of capital instruments and other TLAC liabilities not covered by the 5% threshold described in paragraph 6.3.10(c)(iii) to (iv), multiplied by the amount by which total holdings of capital instruments and other TLAC liabilities not covered by the 5% threshold described in paragraph 6.3.10(c)(iii) to (iv) in aggregate and on a net long basis exceed 10% of the Reporting Bank’s common equity. In this sub-paragraph, the Reporting Bank’s common equity for the purposes of calculating the 10% threshold must be calculated in accordance with paragraph 6.1.5(o)(i) and the AT1 capital instrument holdings must be calculated as follows:
(A) direct, indirect and synthetic holdings of capital instruments must be included. The Reporting Bank must look through holdings of index securities to determine the underlying holdings of capital. The Reporting Bank may, with the prior approval of the Authority, use a conservative estimate121. If the Reporting Bank uses a conservative estimate, the Reporting Bank must ensure that the methodology for the estimate demonstrates that in no case will the actual exposure be higher than the estimated exposure. Despite the cancellation of MAS Notice 637 in force immediately before 1 July 2024, an approval granted under paragraph 6.2.3(d)(i)(A) read with footnote 64C of that Notice, that was in force immediately before 1 July 2024, is treated as an approval granted under paragraph 6.2.6(c)(i)(A) of this Notice and every condition or restriction which the approval was subject to, that was in force immediately before 1 July 2024, will on and after that date continue to apply; (B) the net long positions in both the banking book and trading book must be included. In this regard, the gross long position can be offset against the short position in the same underlying exposure, if the maturity of the short position either matches the maturity of the long position, or has a residual maturity of at least one year122,123,124; 121 If the Reporting Bank finds it operationally burdensome to look through and monitor its exact exposure to the capital of such entities as a result of its holdings of index securities. 122 For positions in the trading book, if the Reporting Bank has a contractual right or obligation to sell a long equity position at a specific point in time and the counterparty in the contract has an obligation to purchase the long equity position if the Reporting Bank exercises its right to sell, this point in time may be treated as the maturity of the long position, and the maturity of the long and short positions are deemed to be matched. 123 For a position hedged against market risk where the hedge does not qualify to offset the gross long position for the purposes of determining the amount to be deducted, the Reporting Bank may choose to include the long position in its calculation of market RWA, in addition to deducting the long position. Where the hedge qualifies to offset the gross long position, the Reporting Bank may choose to exclude both the gross long position and the hedge from its calculation of market RWA. 124 Where a Reporting Bank uses a short position in an index to hedge a long position, the portion of the index that is composed of the same underlying exposure that is being hedged may be used to offset the long position only if (a) both positions are held in the trading book; (b) the positions are accounted for at fair value; and (c) the hedge is recognised as effective under the Reporting Bank’s internal control processes.

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(C) underwriting positions held for a period longer than 5 working days must be included, while those positions held for 5 working days or less can be excluded. The calculation of the period of 5 working days must begin on the date on which the Reporting Bank makes the payment to the issuer to purchase the capital instruments; (D) certain investments where these have been made in the context of resolving or providing financial assistance to reorganise a distressed institution may be temporarily excluded with the prior approval of the Authority; (ii) the total holdings of capital instruments and other TLAC liabilities referred to in sub-paragraph (c)(i) must be calculated in accordance with paragraph 6.1.5(o)(ii); (iii) the amount of total holdings of capital instruments and other TLAC liabilities not covered by the 5% threshold described in paragraph 6.3.10(c)(iii) to (iv) that do not exceed the 10% threshold calculated in accordance with paragraph 6.1.5(o)(i) and are not deducted must continue to be risk-weighted125. For the application of risk-weighting, the amount of the holdings must be allocated on a pro rata basis between those below and those above the threshold; (d) the Reporting Bank must deduct investments in the AT1 capital instruments of unconsolidated financial institutions in which the Reporting Bank holds a major stake (including insurance subsidiaries), in the calculation of AT1 Capital126. The total of such investments must be calculated as follows:
(i) direct, indirect and synthetic holdings must be included. The Reporting Bank must look through holdings of index securities to determine the underlying holdings of AT1 capital instruments. The Reporting Bank may, with the prior approval of the Authority, use a conservative estimate.127 If the Reporting Bank uses a conservative estimate, the Reporting Bank must ensure that the methodology for the estimate demonstrates that in no case will the actual exposure 125 Capital instruments in the banking book and trading book will thus be subject to the capital treatment as set out in Part VII and Part VIII, respectively. 126 To avoid doubt – (a) a capital instrument would be deemed to have met the criteria for AT1 Capital of the Reporting Bank, if it satisfies the applicable regulatory capital criteria imposed by a bank regulatory agency that has implemented the Basel III standards; (b) if the entity in which the Reporting Bank has invested is a financial institution that is subject to minimum prudential standards and supervision by a regulatory agency and if the investment is not included as regulatory capital of the entity, the investment can be excluded for the purposes of this regulatory adjustment; and (c) if the entity in which the Reporting Bank has invested is a financial institution that is not a bank, the entity is subject to minimum prudential standards and supervision by a regulatory agency and the investment is not in the form of ordinary shares but is nevertheless recognised as Tier 1 capital (or its equivalent) of the entity, the capital instrument should be considered as an AT1 capital instrument for the purposes of this regulatory adjustment. 127 If the Reporting Bank finds it operationally burdensome to look through and monitor its exact exposure to the capital or other TLAC liabilities of such entities as a result of its holdings of index securities.

Monetary Authority of Singapore 6-26 be higher than the estimated exposure; (ii) the net long positions in both the banking book and trading book must be included. In this regard, the gross long position can be offset against the short position in the same underlying exposure, if the maturity of the short position either matches the maturity of the long position or has a residual maturity of at least one year128,129,130; (iii) underwriting positions held for a period longer than 5 working days must be included, while those positions held for 5 working days or less can be excluded. The calculation of the period of 5 working days must begin on the date on which the Reporting Bank makes the payment to the issuer to purchase the capital instruments; (iv) certain investments where these have been made in the context of resolving or providing financial assistance to reorganise a distressed institution may be temporarily excluded with the approval of the Authority; (e) the Reporting Bank must deduct any other item or class of items which the Authority may specify in writing to the Reporting Bank for the purposes of this paragraph; (f) in the case where the Reporting Bank does not have enough Tier 2 Capital to satisfy the required deductions set out in paragraph 6.3.10, the Reporting Bank must deduct the shortfall in the calculation of AT1 Capital.
6.2.7 For the purposes of paragraph 6.2.6, indirect holdings of capital instruments
and other TLAC liabilities refer to exposures or parts of exposures that, if a direct holding loses its value, will result in a loss to the Reporting Bank substantially equivalent to the loss in value of the direct holding. Qualifying Capital Instruments Issued by Fully Consolidated Subsidiaries Recognised as Tier 1 Capital
6.2.8 A Reporting Bank may recognise CET1 capital instruments and AT1 capital
instruments issued by a fully consolidated subsidiary of a Reporting Bank to third party 128 For positions in the trading book, if the Reporting Bank has a contractual right or obligation to sell a long equity position at a specific point in time and the counterparty in the contract has an obligation to purchase the long equity position if the Reporting Bank exercises its right to sell, this point in time may be treated as the maturity of the long position, and the maturity of the long and short positions are deemed to be matched. 129 For a position hedged against market risk where the hedge does not qualify to offset the gross long position for the purposes of determining the amount to be deducted, the Reporting Bank may choose to include the long position in its calculation of market RWA, in addition to deducting the long position. Where the hedge qualifies to offset the gross long position, the Reporting Bank may choose to exclude both the gross long position and the hedge from its calculation of market RWA. 130 Where a Reporting Bank uses a short position in an index to hedge a long position, the portion of the index that is composed of the same underlying exposure that is being hedged may be used to offset the long position only if (a) both the long position and the hedge are held in the trading book; (b) the positions are accounted for at fair value; and (c) the hedge is recognized as effective under the Reporting Bank’s internal control processes.

Monetary Authority of Singapore 6-27 investors (including amounts under paragraph 6.1.10) as Tier 1 Capital only if the capital instruments would, if issued by the Reporting Bank, meet all of the criteria for classification as Tier 1 Capital131. The Reporting Bank must calculate the amount that will be recognised as Tier 1 Capital as follows (please refer to Annex 6A for an illustrative example):
(a) Tier 1 capital of the subsidiary issued to third party investors; less (b) the surplus Tier 1 Capital of the subsidiary attributable to third party investors; where – (i) Tier 1 capital of the subsidiary issued to third party investors means the sum of eligible minority interest and AT1 capital instruments issued by the subsidiary which are owned by third party investors; (ii) the surplus Tier 1 Capital of the subsidiary is calculated as the Tier 1 Capital of the subsidiary, minus the lower of – (A) 10.5%132 of the subsidiary’s total RWA; and (B) 10.5%133 of the consolidated RWA attributable to the subsidiary; and (iii) the surplus Tier 1 Capital of the subsidiary attributable to third party investors is calculated by multiplying the surplus Tier 1 Capital of the subsidiary calculated in sub-paragraph (b)(ii), by the percentage of Tier 1 capital that is held by third party investors. A Reporting Bank, when recognising the amount of Tier 1 Capital calculated in this paragraph as AT1 Capital, must exclude amounts recognised as CET1 Capital under paragraph 6.1.10.
6.2.9 Where capital instruments purchased by third party investors are issued for and
on behalf of a Reporting Bank out of an SPE, the Reporting Bank may include such capital instruments in its AT1 Capital and treat such capital instruments as if the Reporting Bank itself had issued the capital instruments directly to the third party investors, only if the capital instruments meet all the relevant entry criteria and the only asset of the SPE is its investment in the capital instruments of the Reporting Bank in a form that meets or 131 CET1 capital instruments and AT1 capital instruments should meet all of the criteria for classification as CET1 capital instruments and AT1 capital instruments, respectively. 132 This represents the sum of the minimum Tier 1 CAR of 8% and Capital Conservation Buffer of 2.5% that is applicable to the banking group. Where the Reporting Bank is not designated by the Authority as a D-SIB, the ratios set out in paragraph 63 of “Basel III: A global regulatory framework for more resilient banks and banking systems” issued by the BCBS in December 2010 (last revised in June 2011), will apply (i.e. 8.5% of the subsidiary’s total RWA, which represents the sum of the minimum Tier 1 CAR of 6% and Capital Conservation Buffer of 2.5%). 133 This represents the sum of the minimum Tier 1 CAR of 8% and Capital Conservation Buffer of 2.5% that is applicable to the banking group. Where the Reporting Bank is not designated by the Authority as a D-SIB, the ratios set out in paragraph 63 of “Basel III: A global regulatory framework for more resilient banks and banking systems” issued by the BCBS in December 2010 (last revised in June 2011), will apply (i.e. 8.5% of the consolidated RWA attributable to the subsidiary, which represents the sum of the minimum Tier 1 CAR of 6% and Capital Conservation Buffer of 2.5%).

Monetary Authority of Singapore 6-28 exceeds all the relevant entry criteria134 (as required by the criterion set out in paragraph 6.2.2(p) for AT1 Capital). In cases where the capital instruments have been issued to third party investors through an SPE by a fully consolidated subsidiary of the Reporting Bank, the Reporting Bank may, subject to the requirements of this paragraph in relation to capital instruments issued through an SPE, treat such capital instruments as if the subsidiary itself had issued the capital instruments directly to third party investors and may include such capital instruments in the Reporting Bank’s consolidated AT1 Capital in accordance with the treatment outlined in paragraph 6.2.8. 134 Assets that relate to the operation of the SPE may be excluded from this assessment if they are de minimis.

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Division 3: Tier 2 Capital
Components of Tier 2 Capital
6.3.1 A Reporting Bank must ensure that its Tier 2 Capital is calculated as the sum of
the following items, at both the Solo and Group levels:
(a) capital instruments issued by the Reporting Bank that comply with the requirements in paragraph 6.3.6, and are not included in Tier 1 Capital; (b) share premium, resulting from the issuance of capital instruments which fall within sub-paragraph (a), if any; (c) capital instruments issued by fully consolidated subsidiaries of the Reporting Bank and held by third party investors that meet the criteria for inclusion in Tier 2 Capital pursuant to paragraphs 6.3.12 and 6.3.13, and are not included in Tier 1 Capital; (d) subject to paragraph 6.3.3, in the case where the Reporting Bank has adopted the SA(CR), SEC-ERBA, SEC-SA, or the approach for securitisation exposures to which the SEC-IRBA, SEC-ERBA, SEC-IAA and SEC-SA cannot be applied, general allowances that are held against future, presently unidentified losses, and that are freely available to meet losses which subsequently materialise. The Reporting Bank must exclude allowances ascribed to the identified deterioration of particular assets or known liabilities, whether individual or grouped. The Reporting Bank must ensure that the general allowances eligible for inclusion, measured gross of tax effects, do not exceed 1.25% of the sum of the Reporting Bank’s (i) SA(CR) RWA determined in the manner set out in paragraph 7.1.1(a), (ii) CCR-SA RWA determined in the manner set out in paragraph 7.1.1(b), (iii) SEC-ERBA RWA, SEC-SA RWA, and RWA from securitisation exposures to which the SEC-IRBA, SEC-ERBA, SEC-IAA and SEC-SA cannot be applied, determined in the manner set out in paragraph 7.1.1(d), and (iv) CCP RWA determined in the manner set out in paragraph 7.1.1(e); (e) subject to paragraph 6.3.3, in the case where the Reporting Bank has adopted the IRBA, any excess of the TEP, measured gross of tax effects, maintained by the Reporting Bank over the total EL amount. The Reporting Bank must ensure that the amount eligible for inclusion does not exceed 0.6% of the sum of the Reporting Bank’s (i) IRBA RWA determined in the manner set out in paragraph 7.1.1(a), (ii) CCR-IRBA RWA determined in the manner set out in paragraph 7.1.1(b), and (iii) SEC-IRBA and SECIAA RWA determined in the manner set out in paragraph 7.1.1(d); (f) regulatory adjustments set out in paragraph 6.3.10.
6.3.2 For the purposes of paragraph 6.3.1(e), where the Authority is not satisfied
that the total EL amount fully reflects the conditions in the market in which the Reporting Bank operates, the Authority may require that a Reporting Bank exclude from Tier 2 Capital the excess amount of the TEP, measured gross of tax effects, maintained by the Reporting

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Bank over the total EL amount, including any excess of specific allowances over the EL amount on defaulted assets to offset the EL amount on non-defaulted assets.
6.3.3 A Reporting Bank must apply paragraphs 6.3.4 and 6.3.5 where it has adopted
(a) the SA(CR), SEC-ERBA, SEC-SA, or the approach for securitisation exposures to which the SEC-IRBA, SEC-ERBA, SEC-IAA and SEC-SA cannot be applied for a portion of its credit exposures, and (b) the IRBA, SEC-IRBA, or SEC-IAA for the remaining portion of its credit exposures.
6.3.4 For the purposes of determining the inclusion of general allowances in Tier 2
Capital under paragraph 6.3.1(d), a Reporting Bank referred to in paragraph 6.3.3 must pro-rate the general allowances it maintains using the following formula:
the sum of the Reporting Bank’s SA(CR)
RWA determined in the manner set out in paragraph 7.1.1(a), its CCR-SA RWA determined in the manner set out in paragraph 7.1.1(b), its SEC-ERBA RWA, SEC-SA RWA, RWA from securitisation exposures to which the SEC-IRBA, SECERBA, SEC-IAA and SEC-SA cannot be applied, determined in the manner set out in paragraph 7.1.1(d), and its CCP RWA determined in the manner set out in paragraph 7.1.1(e) Pro-rated general allowances = total general allowances x ________________________________ the sum of the Reporting Bank’s credit RWA determined in the manner set out in paragraph 7.1.1(a),(b), (d), and (e) Alternatively, subject to the prior approval of the Authority and such conditions as the Authority may impose, the Reporting Bank may rely on its internal methods for allocating general allowances for the purposes of determining their inclusion in Tier 2 Capital under paragraph 6.3.1(d).
6.3.5 For the purposes of determining the inclusion of general allowances in TEP
under paragraph 6.3.1(e), a Reporting Bank referred to in paragraph 6.3.3 must pro-rate the general allowances it maintains using the following formula:
the sum of the Reporting Bank’s IRBA
RWA determined in the manner set out in paragraph 7.1.1(a) and its CCR-IRBA RWA determined in the manner set out in paragraph 7.1.1(b) Pro-rated general allowances = total general allowances x ________________________________ the sum of the Reporting Bank’s credit RWA set out in paragraph 7.1.1(a), (b), (d), and (e)

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Alternatively, subject to the prior approval of the Authority and such conditions as the Authority may impose, the Reporting Bank may rely on its internal models for allocating general allowances for the purposes of determining their inclusion in TEP under paragraph 6.3.1(e). Minimum Requirements for Tier 2 Capital Instruments
6.3.6 For the purposes of paragraph 6.3.1(a), a Reporting Bank must not include a
capital instrument of the Reporting Bank as Tier 2 Capital unless – (a) the capital instrument is issued and fully paid-up in cash. The Reporting Bank must ensure that only the net proceeds received from the issuance of the capital instrument may be included as capital; (b) the capital instrument is subordinated to depositors and general creditors of the Reporting Bank; (c) the paid-up amount is not guaranteed by the Reporting Bank or any of its related corporations or other affiliates, or covered under any other arrangement that legally or economically enhances the seniority of the claim vis-a-vis the Reporting Bank’s creditors and depositors135; (d) the holder of the capital instrument waives his right, if any, to set off any amounts he owes the Reporting Bank against any subordinated amount owed to him due to the capital instrument and commits to return any setoff amounts or benefits received to the liquidator; (e) the subordination provisions of the capital instrument are governed by the laws of Singapore and for capital instruments issued on or after 1 January 2017, the agreements governing the issuance of the capital instruments must provide that any dispute arising out of or in connection with the provisions governed by the laws of Singapore will be determined exclusively by the courts of Singapore. Where the capital instrument is to be subject to the laws of a country or jurisdiction other than Singapore, the Reporting Bank must satisfy itself that all the relevant conditions specified in this paragraph are met under the laws of that country or jurisdiction; (f) with regard to the maturity of the capital instrument – (i) the capital instrument has a minimum original maturity of at least 5 years. Where the agreement governing the issuance of the capital instrument provides for the loan to be drawn down in a series of tranches, the minimum original maturity for each tranche must be 5 years from the date of its draw-down; 135 For example, where the Reporting Bank issues Tier 2 capital instruments via an SPE and provides support to the SPE (e.g. by contributing a reserve), the provision of support will constitute an enhancement and the capital instrument will be regarded as failing to meet this requirement.

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(ii) recognition of the capital instrument as Tier 2 Capital in its final 5 years to maturity is amortised on a straight-line basis by 20% per annum in accordance with Table 6-1. Where the capital instrument is repayable in separate tranches, each tranche must be amortised individually, as if it were a separate loan; and
Table 6-1: Amortisation Schedule for a Tier 2 capital instrument
Years to maturity (x) Amortised amount eligible to be included in Tier 2 Capital x > 4 100% 3 < x ≤4 80% 2 < x ≤ 3 60% 1 < x ≤ 2 40% x ≤ 1 20% (iii) there are no step-ups or other provisions that mandate or create an incentive for the Reporting Bank to redeem the capital instrument136. The Reporting Bank must not create an expectation that the call option will be exercised; (g) subject to paragraph 6.3.7, the capital instrument is callable at the option of the Reporting Bank only after a minimum of 5 years from the issue date, subject to the following requirements:
(i) a call option may be exercised only with the prior approval of the Authority; (ii) the Reporting Bank must not create an expectation that the call option will be exercised137,138; (iii) the Reporting Bank must not exercise a call option unless – (A) the capital instrument is replaced by the Reporting Bank with capital of the same or better quality, and the replacement of 136 For example, the following may be considered as an incentive to redeem:
(a) a call option combined with an increase in the credit spread of the capital instrument if the call option is not exercised; (b) a call option combined with a requirement or an investor option to convert the capital instrument into ordinary shares if the call is not exercised; or (c) a call option combined with a change in reference rate where the credit spread over the second reference rate is greater than the initial payment rate less the swap rate (i.e. the fixed rate paid to the call date to receive the second reference rate). To avoid doubt, a conversion from a fixed rate to a floating rate or vice versa in combination with a call option without any increase in credit spread is not in itself be deemed an incentive to redeem. 137 Where this requirement is met, an option to call the capital instrument after 5 years but prior to the start of the amortisation period will not be deemed an incentive to redeem. 138 For example, the Authority is not likely to grant approval for redemption where a Reporting Bank exercises a call option in respect of a capital instrument and replaces it with another capital instrument that is more costly (e.g. with a higher credit spread).

Monetary Authority of Singapore 6-33 this capital is done at conditions which are sustainable for the income capacity of the Reporting Bank139; or (B) the Reporting Bank demonstrates that its capital position is well above the minimum capital requirements after the call option is exercised; (h) the holder of the capital instrument has no rights to accelerate the repayment of future scheduled payments (either coupon or principal), except in a bankruptcy or liquidation of the Reporting Bank; (i) the capital instrument does not have a credit sensitive dividend feature, i.e. a dividend or coupon that is reset periodically, based in whole or in
part on the credit standing of the Reporting Bank or any banking group
entity;
(j) neither the Reporting Bank nor any of its banking group entities or associates may purchase the capital instrument, nor can the Reporting Bank have directly or indirectly funded the purchase of the capital instrument; (k) if the capital instrument is not issued out of an operating entity or the holding company of the Reporting Bank (e.g. issued out of a SPE), the proceeds from the issuance of the capital instrument must be immediately available without limitation to an operating entity or the holding company of the Reporting Bank in a form which at the minimum meets all of the other requirements set out in this paragraph, for inclusion as Tier 2 Capital; (l) the main features of the capital instrument are disclosed clearly and accurately to the investors of the capital instruments; (m) the agreement governing the issuance of the capital instrument must not be changed without the prior approval of the Authority where such proposed changes could impact its eligibility as Tier 2 Capital; (n) where a Reporting Bank issues the capital instrument in a foreign currency, the capital instrument must be revalued periodically (at least monthly) in terms of Singapore dollars at the prevailing exchange rates. Where the Reporting Bank intends to use a swap to hedge the foreign exchange exposure arising from the foreign currency capital instrument, it must consult the Authority on the capital treatment applicable to the hedge prior to such use; [MAS Notice 637 (Amendment) 2025] 139 Replacement issues can be concurrent with, but not after the capital instrument is called.

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(o) the agreement governing the issuance of the capital instrument contain provisions which ensure its loss absorbency at the point of non-viability that meet the requirements set out in Annex 6B; [MAS Notice 637 (Amendment) 2025] (p) subject to sub-paragraph (r), the Reporting Bank sells the capital instrument to a person that is not a retail investor in Singapore139A; [MAS Notice 637 (Amendment) 2025] (q) subject to sub-paragraph (r), where the Reporting Bank sells the capital instrument to an intermediary, the agreement governing the sale and purchase of the capital instrument provides that the intermediary must not sell the capital instrument to a person that is a retail investor in Singapore139B; and [MAS Notice 637 (Amendment) 2025] (r) where the capital instrument is part of an issue, each capital instrument in that issue is sold by the Reporting Bank in compliance with the requirements in sub-paragraphs (p) and (q)139C. [MAS Notice 637 (Amendment) 2025] 6.3.6A Despite paragraph 6.3.6(p) to (r), a Reporting Bank may include a capital instrument as Tier 2 Capital, if the capital instrument was included as Tier 2 Capital immediately before 1 January 2026. [MAS Notice 637 (Amendment) 2025] 6.3.6B In paragraph 6.3.6(q), “intermediary” means – (a) any entity holding a capital markets services licence granted by the Authority under section 86 of the Securities and Futures Act 2001; 139A To avoid doubt, this requirement applies whether the Reporting Bank sells the capital instrument to an investor or an intermediary. [MAS Notice 637 (Amendment) 2025] 139B To avoid doubt – (a) nothing in paragraph 6.3.6(q) shall be construed to affect the requirements of any other written law, including Part 13 of the Securities and Futures Act 2001; and (b) the Reporting Bank is not required to ensure that the sale of capital instruments by persons (other than the Reporting Bank), complies with paragraph 6.3.6(p) to (r). [MAS Notice 637 (Amendment) 2025] 139C For example, if the Reporting Bank issued S$100 million of capital instruments to investors in Singapore, of which S$90 million of capital instruments are sold to an accredited investor or institutional investor, and S$10 million of capital instruments are sold to retail investors in Singapore, the issue does not comply with paragraph 6.3.6(r). As such, the entire issue of S$100 million must not be included as Tier 2 Capital of the Reporting Bank. [MAS Notice 637 (Amendment) 2025]

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(b) a person who is exempted under section 99(1)(a), (b), (c), (d), (f) or (g) of the Securities and Futures Act 2001 to carry on business in a regulated activity; (c) a person specified in the Second Schedule to the Securities and Futures (Licensing and Conduct of Business) Regulations who is exempted from
section 82(1) of the Securities and Futures Act 2001;
(d) a collective investment scheme or closed-end fund that is a legal person under the laws of the country or jurisdiction in which it is constituted; or (e) a person acting as a trustee of a collective investment scheme or closedend fund that is constituted as a trust. [MAS Notice 637 (Amendment) 2025] 6.3.6C For the purposes of determining whether a person, collective investment scheme or closed-end fund is an intermediary mentioned in paragraph 6.3.6B(c) or (d), as the case may be, a Reporting Bank may rely on written declarations or representations made by the person, collective investment scheme or closed-end fund. [MAS Notice 637 (Amendment) 2025]
6.3.7 The Authority may grant approval for redemption of a capital instrument within
the first 5 years from the issue date where – (a) there is a change in tax status of the capital instrument due to changes in applicable tax laws of the country or jurisdiction in which the capital instrument was issued; or (b) there is a change relating to the recognition of the capital instrument as capital for calculating Total CAR, and provided that the requirements set out in paragraph 6.3.6(g)(i) to (iii) are met. The Authority may, in determining whether to grant approval, consider whether the Reporting Bank was in a position to anticipate the event at the issuance of the capital instrument.
6.3.8 For the purposes of paragraph 6.3.1(b), a Reporting Bank must not include any
share premium that is not eligible for inclusion in Tier 1 Capital, in Tier 2 Capital, unless the shares giving rise to the share premium comply with the requirements in paragraph 6.3.6.
6.3.9 The Reporting Bank must seek prior approval from the Authority if it intends to
include in Tier 2 Capital an instrument that has its coupons paid in anything other than cash or shares. Regulatory Adjustments Applied in the Calculation of Tier 2 Capital
6.3.10 A Reporting Bank must apply the following regulatory adjustments in the
calculation of Tier 2 Capital, at both the Solo and Group levels:

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(a) the Reporting Bank must deduct all investments in the Reporting Bank’s own Tier 2 capital instruments, whether held directly or indirectly by the Reporting Bank or any of its banking group entities, in the calculation of Tier 2 Capital, unless already derecognised under the Accounting Standards.140 If the Reporting Bank or any of its banking group entities is contractually obliged to purchase any of its own Tier 2 capital instruments, the Reporting Bank must deduct such Tier 2 capital instruments in the calculation of Tier 2 Capital. This adjustment must apply to exposures in both the banking book and trading book.141 Where a Reporting Bank acts as a market-maker for its own Tier 2 capital instruments, it is not required to deduct such capital instruments in the calculation of Tier 2 Capital, until the Reporting Bank has offered to purchase the ordinary shares at an agreed price, and this offer has either been accepted or cannot be withdrawn;142 The Reporting Bank may deduct gross long positions net of short positions in the same underlying exposure, only if the short positions involve no counterparty credit risk. The Reporting Bank must look through holdings of index securities to deduct exposures to its own Tier 2 capital instruments. The Reporting Bank may, with the prior approval of the Authority, use a conservative estimate.143 If the Reporting Bank uses a conservative estimate, the Reporting Bank must ensure that the methodology for the estimate demonstrates that in no case will the actual exposure be higher than the estimated exposure. However, the Reporting Bank may net gross long positions in its own Tier 2 capital instruments resulting from holdings of index securities against short positions in its own Tier 2 capital instruments, which result from short positions in the same underlying index144; (b) the Reporting Bank must deduct reciprocal cross holdings in the Tier 2 capital instruments145 and of other TLAC liabilities of financial institutions 140 This deduction is to avoid the double counting of the Reporting Bank’s own capital that arises from direct holdings, indirect holdings via index funds and potential future holdings as a result of contractual obligations to purchase its own Tier 2 capital instruments. 141 To avoid doubt, this adjustment does not cover Tier 2 capital instruments held by the Reporting Bank or any of its banking group entities where – (a) the investments in the Tier 2 capital instruments are funded by third parties other than the Reporting Bank or any of its banking group entities (e.g. life insurance policyholders or other third party investors); (b) the risks and rewards associated with the investments in Tier 2 capital instruments are borne primarily by the third parties; and (c) the decisions to transact in the Tier 2 capital instruments are made independently from the issuer of the capital instruments and in the interests of the third parties. 142 The purpose of the rule is to capture existing
contractual arrangements that could lead to the Reporting Bank being required to make a purchase of its own capital instruments at a price agreed in the contract (e.g. a forward purchase or a written put option), such that the extent of the potential loss is known in advance. It was not intended to capture all potential contracts that a bank may enter to in the future. 143 If the Reporting Bank finds it operationally burdensome to look through and monitor its exact exposure to its own capital as a result of its holdings of index securities. 144 In such cases, the short positions may be exposed to counterparty credit risk, and be subject to the relevant counterparty credit risk charge as set out in Part VII. 145 To avoid doubt –

Monetary Authority of Singapore 6-37 that are designed to artificially inflate the capital position of the Reporting Bank in the calculation of Tier 2 Capital; (c) the Reporting Bank must deduct certain investments in Tier 2 capital instruments and other TLAC liabilities of unconsolidated financial institutions in which the Reporting Bank does not hold a major stake, in the calculation of Tier 2 Capital146, in accordance with sub-paragraphs (c)(i) to (c)(iv):
(i) the amount of such investments to be deducted in the calculation of Tier 2 Capital must be the proportion of total holdings of Tier 2 capital instruments and other TLAC liabilities not covered by the 5% threshold described in paragraph 6.3.10(c)(iii) to (iv) to total holdings of capital instruments and other TLAC liabilities not covered by the 5% threshold described in paragraph 6.3.10(c)(iii) to (iv), multiplied by the amount by which total holdings of capital instruments and other TLAC liabilities not covered by the 5% threshold described in paragraph 6.3.10(c)(iii) to (iv) in aggregate and on a net long basis exceed 10% of the Reporting Bank’s common equity. In this sub-paragraph, the Reporting Bank’s common equity for the purposes of calculating the 10% threshold must be calculated in accordance with paragraph 6.1.5(o)(i) and the total holdings of Tier 2 capital instruments and other TLAC liabilities must be calculated as follows:
(A) direct, indirect and synthetic holdings of capital instruments and other TLAC liabilities must be included. The Reporting Bank must look through holdings of index securities to determine the underlying holdings of capital and other TLAC liabilities. The Reporting Bank may, with the prior approval of the Authority, use a conservative estimate147. If the Reporting Bank uses a conservative estimate, the methodology for the (a) a capital instrument would be deemed to have met the criteria for Tier 2 Capital of the Reporting Bank, if it satisfies the applicable regulatory capital criteria imposed by a bank regulatory agency that has implemented the Basel III standards; and (b) if the entity in which the Reporting Bank has invested is a financial institution that is not a bank, the entity is subject to minimum prudential standards and supervision by a regulatory agency and the investment is not in the form of ordinary shares and is recognised as Tier 2 capital (or its equivalent) of the entity, the capital instrument should be considered as a Tier 2 capital instrument for the purposes of this regulatory adjustment. 146 To avoid doubt – (a) a capital instrument would be deemed to have met the criteria for Tier 2 Capital of the Reporting Bank, if it satisfies the applicable regulatory capital criteria imposed by a bank regulatory agency that has implemented the Basel III standards; (b) if the entity in which the Reporting Bank has invested is a financial institution that is subject to minimum prudential standards and supervision by a regulatory agency and if the investment is not included as regulatory capital of the entity, the investment can be excluded for the purposes of this regulatory adjustment; and (c) if the entity in which the Reporting Bank has invested is a financial institution that is not a bank, the entity is subject to minimum prudential standards and supervision by a regulatory agency and the investment is not in the form of ordinary shares and is recognised as Tier 2 capital (or its equivalent) of the entity, the capital instrument should be considered as a Tier 2 capital instrument for the purposes of this regulatory adjustment. 147 If the Reporting Bank finds it operationally burdensome to look through and monitor its exact exposure to the capital or other TLAC liabilities of such entities as a result of its holdings of index securities.

Monetary Authority of Singapore 6-38 estimate demonstrates that in no case will the actual exposure be higher than the estimated exposure. Despite the cancellation of MAS Notice 637 in force immediately before 1 July 2024, an approval granted under paragraph 6.3.3(d)(i)(A) read with footnote 76C of that Notice, that was in force immediately before 1 July 2024, is treated as an approval granted under paragraph 6.3.10(c)(i)(A) of this Notice and every condition or restriction which the approval was subject to, that was in force immediately before 1 July 2024, will on and after that date continue to apply; (B) the net long positions in both the banking book and trading book must be included. In this regard, the gross long position can be offset against the short position in the same underlying exposure, if the maturity of the short position either matches the maturity of the long position, or has a residual maturity of at least one year148,149,150. For other TLAC liabilities, it is the gross long position that is to be included in paragraph 6.3.10(c)(iii) to (iv) and the net long position that is to be included in paragraph 6.3.10(c)(i) to (ii); (C) underwriting positions held for a period longer than 5 working days must be included, while those positions held for 5 working days or less can be excluded. The calculation of the period of 5 working days must begin on the date on which the Reporting Bank makes the payment to the issuer to purchase the capital instruments; (D) certain investments where these have been made in the context of resolving or providing financial assistance to reorganise a distressed institution may be temporarily excluded with the approval of the Authority; (ii) the total holdings of capital instruments and other TLAC liabilities referred to in sub-paragraph (c)(i) must be calculated in accordance with paragraph 6.1.5(o)(ii); (iii) holdings of other TLAC liabilities must be deducted from Tier 2 capital unless – 148 For positions in the trading book, if the Reporting Bank has a contractual right or obligation to sell a long equity position at a specific point in time and the counterparty in the contract has an obligation to purchase the long equity position if the Reporting Bank exercises its right to sell, this point in time may be treated as the maturity of the long position, and the maturity of the long and short positions are deemed to be matched. 149 For a position hedged against market risk where the hedge does not qualify to offset the gross long position for the purposes of determining the amount to be deducted, the Reporting Bank may choose to include the long position in its calculation of market RWA, in addition to deducting the long position. Where the hedge qualifies to offset the gross long position, the Reporting Bank may choose to exclude both the gross long position and the hedge from its calculation of market RWA. 150 Where a Reporting Bank uses a short position in an index to hedge a long position, the
portion of the index that is composed of the same underlying long exposure that is being hedged may be used to offset the long position only if (a) both the long position and the hedge are held in the trading book; (b) the positions are accounted for at fair value; and (c) the hedge is recognised as effective under the Reporting Bank’s internal control processes.

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(A) the holding falls within the 10% threshold provided for in paragraph 6.1.5(o)(i); or (B) the following conditions are met:
(I) the holding has been designated by the Reporting Bank to be treated in accordance with paragraph 6.3.10(c)(iii); (II) the holding is in the Reporting Bank’s trading book; (III) the holding is sold within 30 business days of the date of its acquisition; (IV) such holdings are, in aggregate and on a gross long basis, less than 5% of the Reporting Bank’s common equity (after applying the regulatory adjustments listed in paragraph 6.1.5(a) to (n)); (iv) if a holding designated under paragraph 6.3.10(c)(iii) no longer meets any of the conditions set out in that paragraph, it must be deducted in full from Tier 2 capital. Once a holding has been designated under paragraph 6.3.10(c)(iii), it may not subsequently be included within the 10% threshold referred to in paragraph 6.1.5(o)(i); (v) the amount of holdings of other TLAC liabilities covered by the 5% threshold described in paragraph 6.3.10(c)(iii) and (iv) and are not deducted must continue to be risk-weighted151; (vi) the amount of total holdings of capital instruments and other TLAC liabilities not covered by the 5% threshold described in paragraph 6.3.10(c)(iii) to (iv) that do not exceed the 10% threshold calculated in accordance with paragraph 6.1.5(o)(i) and are not deducted must continue to be risk-weighted152. For the application of risk-weighting, the amount of the holdings must be allocated on a pro rata basis between those below and those above the threshold; (d) the Reporting Bank must deduct investments in the Tier 2 capital instruments and other TLAC liabilities of unconsolidated financial institutions in which the Reporting Bank holds a major stake (including insurance subsidiaries), in the calculation of Tier 2 Capital153. The total of such investments must be calculated as follows:
151 Capital instruments in the banking book and trading book will thus be subject to the capital treatment as set out in Part VII and Part VIII, respectively. 152 Capital instruments in the banking book and trading book will thus be subject to the capital treatment as set out in Part VII and Part VIII, respectively. 153 To avoid doubt –

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(i) direct, indirect and synthetic holdings must be included. The Reporting Bank must look through holdings of index securities to determine the underlying holdings of Tier 2 capital instruments and other TLAC liabilities. The Reporting Bank may, with the prior approval of the Authority, use a conservative estimate154. If the Reporting Bank uses a conservative estimate, the Reporting Bank must ensure that the methodology for the estimate demonstrates that in no case will the actual exposure be higher than the estimated exposure; (ii) the net long positions in both the banking book and trading book must be included. In this regard, the gross long position can be offset against the short position in the same underlying exposure, if the maturity of the short position either matches the maturity of the long position or has a residual maturity of at least one year155,156,157; (iii) underwriting positions held for a period longer than 5 working days must be included, while those positions held for 5 working days or less can be excluded. The calculation of the period of 5 working days must begin on the date on which the Reporting Bank makes the payment to the issuer to purchase the capital instruments; (iv) certain investments where these have been made in the context of resolving or providing financial assistance to reorganise a distressed institution may be temporarily excluded with the approval of the Authority; (a) a capital instrument would be deemed to have met the criteria for Tier 2 Capital of the Reporting Bank, if it satisfies the applicable regulatory capital criteria imposed by a bank regulatory agency that has implemented the Basel III standards; (b) if the entity in which the Reporting Bank has invested is a financial institution that is subject to minimum prudential standards and supervision by a regulatory agency and if the investment is not included as regulatory capital of the entity, the investment can be excluded for the purposes of this regulatory adjustment; and (c) if the entity in which the Reporting Bank has invested is a financial institution that is not a bank, the entity is subject to minimum prudential standards and supervision by a regulatory agency and the investment is not in the form of ordinary shares and is recognised as Tier 2 capital (or its equivalent) of the entity, the capital instrument must be considered as a Tier 2 capital instrument for the purposes of this regulatory adjustment. 154 If the Reporting Bank finds it operationally burdensome to look through and monitor its exact exposure to the capital or other TLAC liabilities of such entities as a result of its holdings of index securities. 155 For positions in the trading book, if the Reporting Bank has a contractual right or obligation to sell a long equity position at a specific point in time and the counterparty in the contract has an obligation to purchase the long equity position if the Reporting Bank exercises its right to sell, this point in time may be
treated as the maturity of the long position, and the maturity of the long and short positions are deemed to be matched. 156 For a position hedged against market risk where the hedge does not qualify to offset the gross long position for the purposes of determining the amount to be deducted, the Reporting Bank may choose to include the long position in its calculation of market RWA, in addition to deducting the long position. Where the hedge qualifies to offset the gross long position, the Reporting Bank may choose to exclude both the gross long position and the hedge from its calculation of market RWA. 157 Where a Reporting Bank uses a short position in an index to hedge a long position, the portion of the index that is composed of the same underlying long exposure that is being hedged may be used to offset the long position only if (a) both the long position and the hedge are held in the trading book; (b) the positions are accounted for at fair value; and (c) the hedge is recognised as effective under the Reporting Bank’s internal control processes.

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(e) the Reporting Bank must deduct any other item or class of items which the Authority may specify in writing to the Reporting Bank for the purposes of this paragraph.
6.3.11 For the purposes of paragraph 6.3.10, indirect holdings of capital instruments
and other TLAC liabilities refer to exposures or parts of exposures that, if a direct holding loses its value, will result in a loss to the Reporting Bank substantially equivalent to the loss in value of the direct holding. Qualifying Capital Instruments Issued by Fully Consolidated Subsidiaries Recognised as Eligible Total Capital
6.3.12 A Reporting Bank may recognise CET1 capital instruments, AT1 capital
instruments and Tier 2 capital instruments issued by a fully consolidated subsidiary of a Reporting Bank to third party investors (including amounts under paragraphs 6.1.10, 6.2.8 and 6.2.9) as Eligible Total Capital only if the capital instruments would, if issued by the Reporting Bank, meet all of the criteria for classification as Tier 1 Capital or Tier 2 Capital158. The Reporting Bank must calculate the amount that will be recognised as Eligible Total Capital as follows (please refer to Annex 6A for an illustrative example):
(a) total capital of the subsidiary issued to third party investors; less (b) the surplus Eligible Total Capital of the subsidiary attributable to third party investors; where – (i) total capital of the subsidiary issued to third party investors means the sum of Tier 1 capital of the subsidiary and Tier 2 capital instruments issued by the subsidiary which are owned by third party investors; (ii) the surplus Eligible Total Capital of the subsidiary is calculated as the Eligible Total Capital of the subsidiary, minus the lower of – (A) 12.5%159 of the subsidiary’s total RWA; and (B) 12.5%160 of the consolidated RWA attributable to the 158 CET1 capital instruments, AT1 capital instruments and Tier 2 capital instruments should meet all of the criteria for classification as CET1 capital instruments, AT1 capital instruments and Tier 2 capital instruments, respectively. 159 This represents the sum of the minimum Total CAR of 10% and Capital Conservation Buffer of 2.5% that is applicable to the banking group. Where the Reporting Bank is not designated by the Authority as a DSIB, the ratios set out in paragraph 64 of “Basel III: A global regulatory framework for more resilient banks and banking systems” issued by the BCBS in December 2010 (last revised in June 2011), will apply (i.e. 10.5% of the subsidiary’s total RWA, which represents the sum of the minimum Total CAR of 8% and Capital Conservation Buffer of 2.5%). 160 This represents the sum of the minimum Total CAR of 10% and Capital Conservation Buffer of 2.5% that is applicable to the banking group. Where the Reporting Bank is not designated by the Authority as a D-SIB, the ratios set out in paragraph 64 of “Basel III: A global regulatory framework for more resilient

Monetary Authority of Singapore 6-42 subsidiary; and (iii) the surplus Eligible Total Capital of the subsidiary attributable to third party investors is calculated by multiplying the surplus Eligible Total Capital of the subsidiary calculated in sub-paragraph (b)(ii), by the percentage of total capital that is held by third party investors. A Reporting Bank when recognising the amount of Eligible Total Capital calculated in this paragraph as Tier 2 Capital, must exclude amounts recognised as CET1 Capital under paragraph 6.1.10 and amounts recognised as AT1 Capital under paragraphs 6.2.8 and 6.2.9.
6.3.13 Where capital instruments purchased by third party investors are issued for and
on behalf of a Reporting Bank out of an SPE, the Reporting Bank may include such capital instruments in its Tier 2 Capital and treat such capital instruments as if the Reporting Bank itself had issued the capital instruments directly to the third party investors, only if the capital instruments meet all the relevant entry criteria and the only asset of the SPE is its investment in the capital instruments of the Reporting Bank in a form that meets or exceeds all the relevant entry criteria (as required by the criterion set out in paragraph 6.3.6(k) for Tier 2 Capital). In cases where the capital instruments have been issued to third party investors through an SPE by a fully consolidated subsidiary of the Reporting Bank, the Reporting Bank may, subject to the requirements of this paragraph in relation to capital instruments issued through an SPE, treat such capital instruments as if the subsidiary itself had issued the capital instruments directly to third party investors and may include such capital instruments in the Reporting Bank’s consolidated Tier 2 Capital in accordance with the treatment outlined in paragraph 6.3.12. TLAC Holdings
6.3.14 For the purposes of this part, other TLAC liabilities include –
(a) all direct, indirect and synthetic investments in the instruments of a G-SIB resolution entity that are eligible to be recognised as external TLAC but that do not otherwise qualify as regulatory capital161 for the issuing G-SIB, with the exception of instruments excluded by paragraph 6.3.15; and (b) all holdings of instruments issued by a G-SIB resolution entity that rank pari passu to any instruments included in sub-paragraph (a), with the exceptions of – (i) instruments listed as liabilities excluded from TLAC in Section 10 of the FSB TLAC Term Sheet (“Excluded Liabilities”); and banks and banking systems” issued by the BCBS in December 2010 (last revised in June 2011), will apply (i.e. 10.5% of the consolidated RWA attributable to the subsidiary, which represents the sum of the minimum Total CAR of 8% and Capital Conservation Buffer of 2.5%). 161 Tier 2 instruments that no longer count in full as regulatory capital (as a result of having a residual maturity of less than 5 years) continue to be recognised in full as a Tier 2 instrument by the Reporting Bank for the regulatory adjustments in this part.

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(ii) instruments ranking pari passu with instruments eligible to be recognised as TLAC by virtue of the exemptions to the subordination requirements in section 11 of the FSB TLAC Term Sheet.
6.3.15 Where a G-SIB is permitted to recognise instruments ranking pari passu to
Excluded Liabilities as external TLAC instruments162, a Reporting Bank must subject its holdings of those instruments to a proportionate deduction approach. Under this approach, only a proportion of holdings of instruments that are eligible to be recognised as external TLAC by virtue of the exemptions to the subordination requirements set out in the penultimate paragraph of section 11 of the FSB TLAC Term Sheet will be considered a holding of TLAC by the Reporting Bank. The proportion is calculated as:
(a) the funding issued by the G-SIB resolution entity that ranks pari passu with Excluded Liabilities and that is recognised as external TLAC by the GSIB resolution entity; divided by (b) the funding issued by the G-SIB resolution entity that ranks pari passu with Excluded Liabilities and that would be recognised as external TLAC if the subordination requirement was not applied163. A Reporting Bank must calculate its holdings of other TLAC liabilities of the respective issuing G-SIB resolution entities based on the latest available public information provided by the issuing G-SIBs on the proportion to be used.
6.3.16 The Reporting Bank must apply the regulatory adjustments relating to TLAC
holdings set out in this part from the date on which the issuing G-SIB becomes subject to a minimum TLAC requirement164. 162 In certain countries or jurisdictions, G-SIBs may be permitted to recognise instruments ranking pari passu to Excluded Liabilities as external TLAC, up to a limit, in accordance with the exemptions to the subordination requirements set out in the penultimate paragraph of section 11 of the FSB TLAC Term Sheet. 163 For example, if a G-SIB resolution entity has funding that ranks pari passu with Excluded Liabilities equal to 5% of RWAs and receives partial recognition of these instruments as external TLAC equivalent to 3.5% of RWAs, then a Reporting Bank holding such instruments must include only 70% (= 3.5 / 5) of such instruments in calculating its TLAC holdings. The same proportion should be applied by the Reporting Bank to any indirect or synthetic investments in instruments ranking pari passu with Excluded Liabilities and eligible to be recognised as TLAC by virtue of the exemptions to the subordination requirements set out in the penultimate paragraph of section 11 of the FSB TLAC Term Sheet. 164 The conformance period is set out in section 21 of the FSB TLAC Term Sheet. In summary, firms that have been designated as G-SIBs before end-2015 and continue to be designated thereafter, with the exception of such firms headquartered in an emerging market economy, will have to meet the TLAC requirements from 1 January 2019. For firms headquartered in emerging market economies, the requirements will apply from 1 January 2025 at the latest; this may be accelerated in certain circumstances.

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Division 4: Submission Requirements
6.4.1 A Reporting Bank intending to issue or recognise any AT1 capital instrument or
Tier 2 capital instrument for the purposes of inclusion as AT1 Capital under paragraph
6.2.1 or as Tier 2 Capital under paragraph 6.3.1, respectively, must –
(a) consult the Authority well in advance to allow adequate time for review if the capital instrument has additional features which are not explicitly addressed in paragraph 6.2.2 for AT1 Capital, or paragraph 6.3.6 for Tier 2 Capital; and (b) submit the following documents to the Authority before including such issuance as AT1 Capital or Tier 2 Capital:
(i) a declaration signed by the chief financial officer of the Reporting Bank confirming – (A) that the Reporting Bank is responsible for complying with the requirements for inclusion of the issuance of the AT1 capital instrument as AT1 Capital, or the issuance of the Tier 2 capital instrument as Tier 2 Capital; (B) that all the requirements for the inclusion of the issuance of the AT1 capital instrument or Tier 2 capital instrument set out in this Notice have been met; (C) the expected date on which the issuance would be included as AT1 Capital or Tier 2 Capital; and (D) that the Reporting Bank is aware that the Authority may take such necessary action against the Reporting Bank, including requiring the exclusion of the issuance for inclusion as AT1 Capital or as Tier 2 Capital, if the issuance does not, or subsequently does not, comply with the requirements set out in this Notice; (ii) all the executed agreements and offering documents governing the issuance of the AT1 capital instrument or Tier 2 capital instrument; (iii) all external legal opinions obtained in respect of the issuance of the AT1 capital instrument or the Tier 2 capital instrument stating that the requirements in paragraphs 6.2.2 and 6.3.6 (where applicable) have been met; (iv) a memorandum of compliance stating how the issuance complies with each of the requirements set out in paragraphs 6.2.2 and 6.3.6 (where applicable) and identifying the relevant portions of the agreements and offering documents governing the issuance of the AT1 capital instrument or Tier 2 capital instrument which address each requirement;

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(v) the information and documents required to be submitted under paragraph 1.9 of Annex 6B; (vi) where the agreements and offering documents governing the issuance of the AT1 capital instrument or Tier 2 capital instrument are governed by the laws of a country or jurisdiction other than Singapore, a written external legal opinion from an advocate and solicitor qualified to practise Singapore law, that he has reviewed all the agreements and offering documents governing the issuance, including any legal opinion from foreign law practitioners provided pursuant to paragraph 6.4.1(b)(iii) and the memorandum of compliance, and confirms that the memorandum of compliance read together with such agreements, offering documents, legal opinions and any letter of undertaking provided by the Reporting Bank or any banking group entity address the requirements of paragraphs 6.2.2 or 6.3.6, as the case may be.
6.4.2 For the purposes of paragraph 6.4.1(b)(iii), the written external legal opinion
must be reasonably unqualified, in particular with respect to the prohibition on provisions which mandate or create incentives for the redemption of the instrument, and other requirements relating to loss absorption, priority of claims, waiver of set-off amounts or benefits and subordination.

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Annex 6A
MINORITY INTEREST AND OTHER CAPITAL ISSUED BY FULLY CONSOLIDATED SUBSIDIARIES HELD BY THIRD PARTY INVESTORS – AN ILLUSTRATIVE EXAMPLE This Annex illustrates the treatment of minority interest and other capital issued by subsidiaries to third party investors, set out in paragraphs 6.1.10, 6.2.8, 6.2.9, 6.3.12 and 6.3.13. A banking group consists of 2 legal entities that are both banks. Bank P is the parent and Bank S is the subsidiary and their unconsolidated balance sheets are set out below. Bank P balance sheet Bank S balance sheet Assets Loans to customers Investment in CET1 capital instruments of Bank S Investment in AT1 capital instruments of Bank S Investment in Tier 2 capital instruments of Bank S Liabilities and equity Depositors Tier 2 capital instruments AT1 capital instruments Common equity 100 7 4 2 70 10 7 26 Assets Loans to customers Liabilities and equity Depositors Tier 2 capital instruments AT1 capital instruments Common equity 150 127 8 5 10 The balance sheet of Bank P shows that in addition to its loans to customers, it owns 70% of the ordinary shares of Bank S, 80% of the AT1 capital of Bank S and 25% of the Tier 2 capital of Bank S. The ownership of the capital of Bank S is therefore as follows:
Capital issued by Bank S
Amount issued to parent
(Bank P)
Amount issued to third party investors
Total
CET1 capital (CET1) 7 3 10
AT1 capital (AT1) 4 1 5
Tier 1 capital (T1) 11 4 15
Tier 2 capital (T2) 2 6 8
Total capital (TC) 13 10 23

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The consolidated balance sheet of the banking group is set out below:
Consolidated balance sheet
Assets
Loans to customers
Liabilities and equity
Depositors
Tier 2 capital issued by subsidiary to third party investors Tier 2 capital issued by parent AT1 capital issued by subsidiary to third party investors AT1 capital issued by parent Common equity issued by subsidiary to third party investors (i.e. minority interest) Common equity issued by parent 250 197 6 10 1 7 3 26 For illustrative purposes Bank S is assumed to have RWA of 100. In this example, the minimum capital requirements of Bank S and the subsidiary’s contribution to the consolidated requirements are the same since Bank S does not have any loans to Bank P. This means that it is subject to the following minimum plus capital conservation buffer requirements and has the following surplus capital:
Minimum and surplus capital of Bank S
Minimum plus capital conservation buffer
Surplus
CET1 9.0
(= 9.0% of 100)
1.0
(=10 − 9.0)
T1 10.5
(= 10.5% of 100)
4.5
(=10 + 5 − 10.5)
TC 12.5
(= 12.5% of 100)
10.5
(=10 + 5 + 8 − 12.5)

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The following table illustrates how to calculate the amount of capital issued by Bank S to include in consolidated capital, following the calculation procedure set out in paragraphs 6.1.10, 6.2.8, 6.2.9, 6.3.12 and 6.3.13:
Bank S: Amount of capital issued to third party investors included in consolidated capital Total amount issued (a) Amount issued to third party investors (b) Surplus (c) Surplus attributable to third party investors (i.e. amount excluded from consolidated capital) (d) =(c) * (b)/(a) Amount included in consolidated capital (e) = (b) − (d) CET1 10 3 1.0 0.30 2.70 T1 15 4 4.5 1.20 2.80 TC 23 10 10.5 4.57 5.43 The following table summarises the components of capital for the consolidated group based on the amounts calculated in the table above. AT1 capital is calculated as the difference between CET1 capital and Tier 1 capital, and Tier 2 capital is the difference between Total capital and Tier 1 capital. Total amount issued by parent (all of which is to be included in consolidated capital) Amount issued by subsidiaries to third party investors to be included in consolidated capital Total amount issued by parent and subsidiary to be included in consolidated capital CET1 26 2.70 28.70 AT1 7 0.10 7.10 T1 33 2.80 35.80 T2 10 2.63 12.63 TC 43 5.43 48.43

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Annex 6B
REQUIREMENTS TO ENSURE LOSS ABSORBENCY AT THE POINT OF NON-VIABILITY
1.1 Paragraphs 6.2.2(s) and 6.3.6(o) require that the terms and conditions of AT1
capital instruments and Tier 2 capital instruments contain provisions which ensure their loss absorbency at the point of non-viability. A Reporting Bank must have a provision in the terms and conditions of all AT1 capital instruments and Tier 2 capital instruments issued by the Reporting Bank that requires such instruments, at the option of the Authority, to either be partially or fully written off or converted into ordinary shares upon the occurrence of the trigger event. The Reporting Bank must ensure that the write-off of any capital instruments issued by an SPE to investors mirrors the write-off of capital instruments issued by the Reporting Bank to the SPE, and the write-off or conversion must not constitute an event of default for the capital instruments. The Reporting Bank must consult the Authority on such arrangements in advance, to allow adequate time for review.
1.2 The Reporting Bank must ensure that any compensation paid to the instrument
holders as a result of a write-off is paid immediately in the form of ordinary shares of the Reporting Bank (including any successor in resolution). The Reporting Bank must approach the Authority before the issuance of ordinary shares of the holding company of the Reporting Bank, where such shares are paid as compensation to the holders of the capital instrument.
1.3 A Reporting Bank must maintain at all times, all prior authorisation necessary
to immediately issue the relevant number of ordinary shares specified in the capital instrument's terms and conditions should the trigger event occur. The Reporting Bank must ensure that the conversion formula for determining the number of ordinary shares to be issued upon conversion of the capital instrument is fixed at the point of issuance, and includes a limit on the maximum number of ordinary shares that would be issued upon conversion.
1.4 The Reporting Bank must ensure that the trigger event is the earlier of:
(a) the Authority notifying the Reporting Bank in writing that the Authority is of the opinion that a write-off or conversion is necessary, without which the Reporting Bank would become non-viable; and (b) the Authority’s decision to make a public sector injection of capital, or equivalent support, without which the Reporting Bank would have become non-viable, as determined by the Authority.
1.5 The Authority may take into account, among other considerations, the
following165 in assessing a Reporting Bank’s viability:
165 In its assessment, the Authority will bear in mind the aim of the requirements, which is to ensure loss absorbency at the point of non-viability. The Authority will also have full discretion to not trigger the provision under paragraph 1.1 of Annex 6B even if the Reporting Bank is assessed to have ceased, or is about to cease, to be viable.

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(a) whether the assets of the Reporting Bank are, in the Authority’s opinion, sufficient to provide adequate protection to the Reporting Bank’s depositors and creditors; (b) whether the Reporting Bank has lost the confidence of depositors, other creditors or the public. This may be characterised by ongoing increased difficulty of the Reporting Bank in obtaining or rolling over short-term funding; (c) whether the Reporting Bank’s regulatory capital has, in the Authority’s opinion, reached a level, or is eroding in a manner, that may detrimentally affect its depositors or creditors; (d) whether the Reporting Bank failed to pay any liability that has become due and payable or, in the Authority’s opinion, will not be able to pay its liabilities as they become due and payable; (e) whether the Reporting Bank failed to comply with an order of the Authority to increase its capital; (f) whether in the Authority’s opinion, any other state of affairs exists in respect of the Reporting Bank that may be materially prejudicial to the interests of the Reporting Bank’s depositors or creditors or the owners of any assets under the Reporting Bank’s administration; (g) whether the Reporting Bank is able to recapitalise on its own through the issuance of ordinary shares or other forms of regulatory capital.
1.6 The Reporting Bank must ensure that the issuance of any new ordinary shares
as a result of the trigger event occurs prior to any public sector injection of capital so that the capital provided by the public sector is not diluted. Additional requirements for capital instruments issued by fully consolidated subsidiaries
1.7 Where a Reporting Bank intends to include the AT1 capital instruments and Tier
2 capital instruments issued by its subsidiary or issued for and on behalf of its subsidiary by an SPE in the consolidated group’s regulatory capital at the Group level, the Reporting Bank may do so, to the extent permitted by the rules on eligibility of capital issued out of subsidiaries and held by third party investors set out in paragraphs 6.1.10, 6.2.8, 6.2.9, 6.3.12, 6.3.13 of this Part, if the terms and conditions specify an additional trigger event. The Reporting Bank must ensure that this additional trigger event is the earlier of – (a) the Authority notifying the Reporting Bank in writing that the Authority is of the opinion that a write-off or conversion is necessary, without which the Reporting Bank would become non-viable; and (b) the Authority’s decision to make a public sector injection of capital, or equivalent support, without which the Reporting Bank would have become non-viable, as determined by the Authority.

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1.8 For the purposes of paragraph 1.7, the Reporting Bank must ensure that any
ordinary shares paid as compensation to the holders of the capital instrument are ordinary shares of either the subsidiary or of the Reporting Bank (including any successor in resolution). The Reporting Bank must approach the Authority before the issuance of ordinary shares paid as compensation to the holders of the capital instrument to be those of the holding company of the Reporting Bank. Submission requirements
1.9 For the purposes of ensuring compliance with the above requirements, the
Reporting Bank must submit the following information and documents to the Authority before including any issuance of capital instruments as AT1 Capital or Tier 2 Capital:
(a) an external legal opinion confirming that the write-off or conversion feature at the point of non-viability is enforceable, and that there are no impediments to the write-off or conversion of the instrument into ordinary shares of the Reporting Bank (or a banking group entity, where applicable) upon a trigger event; (b) where the terms of the instrument provide for trigger events in addition to the trigger events specified in this Annex, the rationale for these additional trigger events and an assessment of the possible market implications that might arise from the inclusion of these additional trigger events or upon a breach of these trigger events; (c) a detailed description of the rationale for the specified conversion method, including computations of the indicative dilution of the Reporting Bank’s ordinary shares that would occur upon a trigger event, and an explanation of why such a conversion approach would help to ensure or maintain the viability of the Reporting Bank. The Authority may require the Reporting Bank to submit additional information in such form and manner (as specified in writing by the Authority) before such capital instruments can be included as AT1 Capital or Tier 2 Capital.

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Annex 6C
STANDARDS FOR A PRUDENT VALUATION FRAMEWORK
1.1 This Annex sets out the standards for valuing positions166 that are accounted
for at fair value, whether they are in the trading book or the banking book of a Reporting Bank (such positions are referred to in this Annex as “positions”).
1.2 These standards are especially important for positions without actual market
prices or observable inputs to valuation, as well as less liquid positions. The standards are not intended to require a Reporting Bank to change valuation procedures for financial reporting purposes.
1.3 The Authority will review the implementation of these standards by a Reporting
Bank to assess the quality of its risk management systems, including whether the Reporting Bank has taken appropriate valuation adjustments for regulatory purposes under paragraphs 1.17 to 1.20 of this Annex. The degree of consistency between the Reporting Bank’s valuation procedures and these standards will be a factor in the Authority’s assessment of whether the Reporting Bank must take a valuation adjustment for regulatory purposes under paragraphs 1.17 to 1.20 of this Annex. Governance Structure
1.4 A Reporting Bank must have in place a clear and delineated governance
structure that facilitates the setting, implementation and review of its policies and procedures on valuation. A Reporting Bank must ensure that the governance structure includes all of the following key elements:
(a) approval by the Board for the overall valuation framework for positions of the Reporting Bank; (b) periodic review by the Board on the valuation framework to ensure it remains appropriate, especially if any major acquisition, disposal or business changes have occurred; (c) approval by the Board on all significant changes to a Reporting Bank’s valuation policies and procedures; (d) significant involvement by senior management of a Reporting Bank in the design and implementation of the controls and methodologies within the approved valuation framework; (e) proper oversight by senior management on any significant breach of valuation policies and other significant issues arising from the valuation process. The Reporting Bank must document all breaches of valuation policies and issues arising from the valuation process, and the actions taken. 166 To avoid doubt, this includes positions in instruments that are in scope for credit risk capital requirements and positions in instruments that are in scope for market risk capital requirements.

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Policies, Systems and Controls
1.5 A Reporting Bank must ensure that its senior management establishes and
maintains adequate policies, systems and controls to ensure that its valuation methodologies are robust and reliable.
1.6 A Reporting Bank must maintain sufficient documentation on its valuation
policies and procedures. The Reporting Bank must ensure that such documentation contains all of the following key elements:
(a) responsibilities of the various units involved in the determination of the valuation; (b) sources of market information and provisions for regular reviews of their appropriateness; (c) policies for the use of unobservable inputs reflecting the Reporting Bank’s assumptions of what market participants would use in pricing the position; (d) frequency of independent valuation; (e) timing for obtaining closing prices; (f) procedures for adjusting valuations; (g) end-of-the-month and other ad-hoc verification procedures167.
1.7 A Reporting Bank must ensure that its units or departments accountable for the
valuation process maintain clear reporting lines which are independent of the market risktaking function of the Reporting Bank168.
1.8 A Reporting Bank must integrate its valuation systems with other risk
management systems within the Reporting Bank.
1.9 A Reporting Bank must ensure that its IA or external auditors conduct reviews
of the independent price verification procedures and control processes on an annual basis. Marking-to-Market
1.10 A Reporting Bank must mark-to-market its positions using readily available
close out prices169 that are sourced independently.
167 This may include collateral reconciliations to position values, a review of similar recent transactions and early termination analysis. 168 A Reporting Bank should ensure that the reporting line is ultimately to an executive director of the Board of the Reporting Bank. 169 Examples of readily available close out prices include exchange prices, screen prices, or quotes from several independent reputable brokers.

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1.11 A Reporting Bank must mark-to-market its positions on a regular and consistent
basis and this must be done at least daily170. The Reporting Bank must use the more prudent side of bid and offer unless the Reporting Bank is a significant market maker in a particular position type and has the ability to close out at mid-market. Marking-to-Model
1.12 Despite paragraph 1.11 of this Annex, where marking-to-market is not possible,
a Reporting Bank must mark-to-model.
1.13 A Reporting Bank must meet all of the following requirements when
implementing its marked-to-model valuation framework:
(a) the Reporting Bank must ensure its senior management is aware of the elements of the trading book or of other fair-valued positions which are marked-to-model and understand the materiality of the uncertainty this creates in the reporting of the risk or performance of the business; (b) the Reporting Bank must ensure that market inputs are sourced externally and the appropriateness of market inputs for a particular position being valued is reviewed on a regular basis; (c) the Reporting Bank must ensure that, where available, generally accepted valuation methodologies for particular products are used; (d) where a model used in the valuation framework171 is developed by the Reporting Bank, the Reporting Bank must ensure that the model, and any significant changes made to an existing model, are validated by a unit, or department, independent of both the development process and the front office, and that the validation includes validating the mathematics, the assumptions and the software implementation; (e) the Reporting Bank must ensure that there are formal change control procedures in place for changes to models used in the valuation framework, and a copy of each model is maintained, with access controls in place to prevent unauthorised changes to the models, and periodically used to check the accuracy of valuations; (f) the Reporting Bank must be aware of the weaknesses of each model used in the valuation framework and assess how best to reflect those in the model valuation; 170 A Reporting Bank should maximise the use of relevant observable inputs and minimise the use of unobservable inputs when estimating fair value using a valuation technique. However, observable inputs, such as transactions, may not be relevant, such as in a forced liquidation or distressed sale, or transactions may not be observable, such as when markets are inactive. In such cases, the Reporting Bank should consider the observable inputs, although such inputs may not be determinative of the fair value of a position. 171 The Reporting Bank should ensure that each model used in the valuation framework is developed or approved by a unit or department independent of the front office and based on reasonable and appropriate assumptions which have been documented, and challenged and assessed by suitably qualified parties independent of the development process.

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(g) the Reporting Bank must ensure that each model used in the valuation framework is reviewed to ascertain the accuracy of its performance, and such review includes ascertaining the reasonableness of assumptions made, analysing how changes in risk factors affect the profit and loss of a position and comparing how close actual close out values are to model valuations, and is conducted – (i) periodically; and (ii) when there are changes in the model or in the assumptions resulting from developments in market conditions, and the Reporting Bank must document, for each model, the outcome of the review, the date of the last review and the scheduled date for the next review; (h) the Reporting Bank must ensure that valuation adjustments are made as appropriate, including to address the uncertainty of a model valuation (see also paragraphs 1.15 to 1.20 of this Annex). Independent Price Verification172
1.14 A Reporting Bank must verify the market prices and model inputs used for
marking-to-market and marking-to-model, respectively, for appropriateness and accuracy. A Reporting Bank must ensure that price verification is performed by a unit independent of the market risk-taking function at a frequency that is commensurate with the nature of the market or trading activity, and in any case not less frequently than once a month.173,174 Valuation Adjustments
1.15 A Reporting Bank must establish and maintain procedures for considering
valuation adjustments175, whether the position is marked-to-market using market prices, observable inputs or third-party valuations, or marked-to-model.
1.16 While the list below is not intended to be exhaustive, a Reporting Bank must
make valuation adjustments176, where relevant, for the following:
(a) unearned credit spreads;
172 Independent price verification is a process by which market prices or model inputs are regularly and independently verified for accuracy. 173 A Reporting Bank need not perform independent price verification daily, since the daily mark-to-market process should reveal any error or bias in pricing, which should result in the elimination of inaccurate daily marks. 174 A Reporting Bank should make independent unscheduled (e.g. mid-month) price verification of its positions. This should be performed especially if the Reporting Bank identifies potential or actual problems or inaccuracies in its valuation process and results. In the case where pricing sources are limited, e.g. only one available broker quote, measures such as valuation adjustments may be appropriate. 175 A Reporting Bank should make valuation adjustments at the position level, which means valuation adjustments should be made to the valuation of the net position in the same instrument. 176 The Reporting Bank should review the appropriateness of the valuation adjustments regularly.

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(b) close-out costs;
(c) operational risks;
(d) early termination;
(e) investing and funding costs;
(f) future administrative costs;
(g) model risk.
Adjustment to the current valuation of less liquid positions for regulatory capital purposes
1.17 A Reporting Bank must establish and maintain procedures for judging the
necessity of and calculating an adjustment to the current valuation of less liquid positions for regulatory capital purposes.177 A Reporting Bank must consider the need for an adjustment to a position’s valuation to reflect current illiquidity whether the position is marked-to-market using market prices, observable inputs or third-party valuations, or marked-to-model.
1.18 Where assumptions made about liquidity by a Reporting Bank in calculating its
market risk capital requirements are inconsistent with the Reporting Bank’s ability to sell or hedge out less liquid positions178, a Reporting Bank must make an adjustment to the current valuation of these positions, where appropriate, and review their continued appropriateness on an ongoing basis. The Reporting Bank must consider all relevant factors and, at a minimum, the following factors when determining the appropriateness of the valuation adjustment for less liquid positions:
(a) the amount of time it would take to hedge out the risks within the position; (b) the average volatility of bid and offer spreads; (c) the availability of independent market quotes (including the number and identity of market makers); (d) the average trading volume and volatility of trading volumes (including trading volumes during periods of market stress); (e) market concentrations179; (f) the ageing of positions180; 177 This adjustment may be in addition to any changes to the value of the position required for financial reporting purposes. 178 Reduced liquidity may have arisen from market events. 179 A Reporting Bank should consider the impact of liquidating concentrated positions when determining the valuation adjustment. 180 A Reporting Bank should consider the impact of liquidating stale positions when determining the valuation adjustment.

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(g) the extent to which valuation relies on marking-to-model; (h) the impact of other model risks, which the Reporting Bank has not calculated valuation adjustments for under paragraph 1.17 of this Annex.
1.19 For complex products including, but not limited to, securitisation exposures and
n-th-to-default credit derivatives, a Reporting Bank must explicitly assess the need for valuation adjustments to reflect 2 forms of model risk: the model risk associated with using a possibly incorrect valuation methodology and the risk associated with using unobservable (and possibly incorrect) calibration parameters in the valuation model.
1.20 In some circumstances, it is possible that the adjustments to the current
valuation of less liquid positions made under paragraph 1.17 of this Annex may exceed those valuation adjustments made under financial reporting standards and paragraphs
1.15 and 1.16 of this Annex. Where this occurs, a Reporting Bank must deduct the
difference in the calculation of CET1 Capital.

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PART VII: CREDIT RISK
Division 1: Overview of Credit RWA Calculation Sub-division 1: Introduction
7.1.1 A Reporting Bank must calculate its credit RWA as the sum of –
(a) its SA(CR) RWA calculated in accordance with Sub-division 3 of this Division and its IRBA RWA calculated in accordance with Sub-division 4 of this Division, for on-balance sheet assets held in the banking book and off-balance sheet items held in the banking book, other than – (i) exposures belonging to sub-paragraphs (b), (c), (d), (e) and (f); and (ii) any securitised exposure that meets the requirements for the recognition of risk transference in a traditional securitisation set out in Sub-division 2 of Division 6 of this Part; (b) its CCR-SA RWA and CCR-IRBA RWA, calculated in accordance with Subdivision 5 of this Division, for CCR exposures in the banking book and CCR exposures in the trading book, other than exposures belonging to subparagraphs (c), (d), (e), and (f); (c) its RWA for equity investments in funds, held in the banking book, calculated in accordance with Sub-division 6 of this Division; (d) its SEC-IRBA RWA, SEC-ERBA RWA, SEC-IAA RWA, SEC-SA RWA, and RWA from securitisation exposures to which the SEC-IRBA, SEC-ERBA, SEC-IAA and SEC-SA cannot be applied, calculated in accordance with Sub-division 7 of this Division, for securitisation exposures held in the banking book; (e) its CCP RWA calculated in accordance with Division 7 of this Part for exposures to CCPs arising from – (i) CCR exposures in the banking book; (ii) CCR exposures in the trading book; and (iii) default fund exposures; and (f) its UST-DvP RWA and UST-non-DvP RWA, calculated in accordance with Division 8 of this Part, for UST exposures in the banking book and UST exposures in the trading book.

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Sub-division 2: Exposures Included in the Calculation of SA(CR) RWA and IRBA RWA
7.1.2 For the purposes of paragraph 7.1.1(a), a Reporting Bank must include an
exposure within the scope of paragraph 7.1.1(a) in its calculation of – (a) IRBA RWA, if the exposure belongs to a class of exposures for which the Reporting Bank has obtained IRBA approval under paragraph 7.4.11; or (b) SA(CR) RWA, in any other case. Sub-division 3: Calculation of SA(CR) RWA
7.1.3 To calculate its SA(CR) RWA, a Reporting Bank must –
(a) apply the exposure measurement requirements in Sub-divisions 1 and 4 of Division 2 of this Part, and Sub-division 2 or 3 of Division 2 of this Part, to calculate E, or where applicable E*, for an SA(CR) exposure; (b) categorise that SA(CR) exposure in accordance with Sub-division 1 of Division 3 of this Part; (c) allocate an applicable credit quality grade and risk weight for that SA(CR) exposure in accordance with Sub-divisions 2 and 3 respectively of Division 3 of this Part; (d) calculate the credit risk-weighted exposure amount for that SA(CR) exposure using the following formula:
Credit RWE = Exposure x RW where –
(i) “Credit RWE” refers to the credit risk-weighted exposure amount for that SA(CR) exposure; (ii) “Exposure” refers to E, or where applicable E*, for that SA(CR) exposure; and (iii) “RW” refers to the applicable risk weight for that SA(CR) exposure determined in accordance with sub-paragraph (c); and (e) aggregate the credit risk-weighted exposure amounts calculated in accordance with sub-paragraph (d) for all its SA(CR) exposures.
7.1.4 To avoid doubt, a Reporting Bank must cap the credit risk-weighted exposure
amount calculated in accordance with paragraph 7.1.3(d) for any transaction for which CRM has been used, to the credit risk-weighted exposure amount applicable to an otherwise identical transaction where such CRM is not used.

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Sub-division 4: Calculation of IRBA RWA
7.1.5 To calculate its IRBA RWA, a Reporting Bank must –
(a) apply the exposure measurement requirements in Sub-divisions 1 and 4 of Division 2 of this Part, and Sub-division 2 or 3 of Division 2 of this Part, to calculate EAD, or where applicable EAD*, for an IRBA exposure; (b) categorise that IRBA exposure in accordance with Sub-division 5 of Division 4 of this Part; (c) calculate Kcorp, Ksm, Ksov, Kbank, Kmort, Kqrre, Koret, Kcp, Ksp, Krp, or Kdef, whichever is applicable to that IRBA exposure based on the categorisation in sub-paragraph (b) (other than an IRBA exposure categorised under the SL asset sub-class or the HVCRE asset sub-class), in accordance with Subdivisions 6, 8, 9, 10 and 12 of Division 4 of this Part, as the case may be; (d) if the IRBA exposure is categorised under the SL asset sub-class or the HVCRE asset sub-class – (i) where the Reporting Bank complies with the requirements in Annex 7X for deriving estimates of PD for such exposures, calculate Ksl, Khv or Kdef for that IRBA exposure in accordance with Sub-divisions 6, 8 and 12 of Division 4 of this Part; and (ii) in all other cases, determine RWslot for that IRBA exposure in accordance with the supervisory slotting criteria set out in Annex 7S and Sub-division 13 of Division 4 of this Part; (e) calculate the credit risk-weighted exposure amount for that IRBA exposure as follows:
(i) for an IRBA exposure categorised under the SL asset sub-class or the HVCRE asset sub-class that is not in default and for which the Reporting Bank is using the supervisory slotting criteria to calculate the credit risk-weighted exposure amount, using the following formula:
Credit RWE = Exposure x RWslot where –
(A) “Credit RWE” refers to the credit risk-weighted exposure amount for that IRBA exposure; (B) “RWslot” refers to RWslot determined in accordance with subparagraph (d); and (C) “Exposure” refers to EAD, or where applicable EAD*, for that IRBA exposure;

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(ii) for all other IRBA exposures, using the following formula:
Credit RWE = Exposure x K x 12.5 where –
(A) “Credit RWE” refers to the credit risk-weighted exposure amount for that IRBA exposure; (B) “K” refers to Kcorp, Ksm, Ksov, Kbank, Ksl, Khv, Kmort, Kqrre, Koret, Kcp, Ksp, Krp, or Kdef, whichever is applicable to that IRBA exposure based on the categorisation in sub-paragraph (b), calculated in accordance with sub-paragraph (c); and (C) “Exposure” refers to EAD, or where applicable EAD*, for that IRBA exposure; and (f) aggregate the credit risk-weighted exposure amounts calculated in accordance with sub-paragraph (e) for all its IRBA exposures.
7.1.6 To avoid doubt, a Reporting Bank must cap the credit risk-weighted exposure
amount calculated in accordance with paragraph 7.1.5(e) for any transaction for which CRM has been used, to the credit risk-weighted exposure amount applicable to an otherwise identical transaction where such CRM is not used. Sub-division 5: Calculation of CCR-SA RWA and CCR-IRBA RWA
7.1.7 A Reporting Bank must include every CCR exposure (other than any exposure
to a CCP arising from a CCR exposure) in its calculation of either CCR-SA RWA or CCR-IRBA RWA, as the case may be.
7.1.8 For the purposes of this Sub-division –
(a) “IRBA exposure” refers to any CCR exposure (other than any exposure to a CCP arising from a CCR exposure) that belongs to a class of exposures for which the Reporting Bank has obtained IRBA approval under paragraph 7.4.11; and (b) “SA(CR) exposure” refers to any CCR exposure (other than any exposure to a CCP arising from a CCR exposure) in any other case.
7.1.9 A Reporting Bank must calculate its CCR-SA RWA by –
(a) applying the exposure measurement requirements in Sub-divisions 1 and 9 of Division 2 of this Part, and Sub-divisions 6, 7 or 8 of Division 2 of this
Part to calculate E, or where applicable E*, for an SA(CR) exposure;
(b) categorising the SA(CR) exposure referred to in sub-paragraph (a) in accordance with Sub-division 1 of Division 3 of this Part;

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(c) allocating an applicable credit quality grade and risk weight for the SA(CR) exposure referred to in sub-paragraph (a) in accordance with Subdivisions 2 and 3 respectively of Division 3 of this Part; (d) calculating the credit risk-weighted exposure amount for the SA(CR) exposure referred to in sub-paragraph (a) using the following formula:
Credit RWE = Exposure x RW where –
(i) “Credit RWE” refers to the credit risk-weighted exposure amount for that SA(CR) exposure; (ii) “Exposure” refers to E, or where applicable E*, for that SA(CR) exposure; and (iii) “RW” refers to the applicable risk weight for that SA(CR) exposure determined in accordance with sub-paragraph (c); and (e) aggregating the credit risk-weighted exposure amounts calculated in accordance with sub-paragraph (d) for all its SA(CR) exposures.
7.1.10 A Reporting Bank must calculate its CCR-IRBA RWA by –
(a) applying the exposure measurement requirements in Sub-divisions 1 and 9 of Division 2 of this Part and Sub-divisions 6, 7 or 8 of Division 2 of this
Part to calculate EAD, or where applicable E*, for an IRBA exposure;
(b) categorising the IRBA exposure referred to in sub-paragraph (a) in accordance with Sub-division 5 of Division 4 of this Part; (c) calculating Kcorp, Ksm, Ksov, Kbank, Kmort, Kqrre, Koret, Kcp, Ksp, Krp, or Kdef, whichever is applicable to the IRBA exposure referred to in sub-paragraph (a) based on the categorisation in sub-paragraph (b) (other than an IRBA exposure categorised under the SL asset sub-class or the HVCRE asset sub-class), in accordance with Sub-divisions 6, 8, 9, 10, and 12 of Division 4 of this
Part, as the case may be;
(d) if the IRBA exposure referred to in sub-paragraph (a) is categorised under the SL asset sub-class or the HVCRE asset sub-class – (i) where the Reporting Bank complies with the requirements in Annex 7X for deriving estimates of PD for such exposures, calculating Ksl, Khv or Kdef for that IRBA exposure in accordance with Sub-divisions 6, 8 and 12 of Division 4 of this Part; and (ii) in all other cases, determining RWslot for that IRBA exposure in accordance with the supervisory slotting criteria set out in Annex 7S and Sub-division 13 of Division 4 of this Part;

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(e) calculating the credit risk-weighted exposure amount for the IRBA exposure referred to in sub-paragraph (a) as follows:
(i) for an IRBA exposure categorised under the SL asset sub-class or the HVCRE asset sub-class that is not in default and for which the Reporting Bank is using the supervisory slotting criteria to calculate the credit risk-weighted exposure amount, using the following formula:
Credit RWE = Exposure x RWslot where –
(A) “Credit RWE” refers to the credit risk-weighted exposure amount for that IRBA exposure; (B) “RWslot” refers to RWslot determined in accordance with subparagraph (d); and (C) “Exposure” refers to EAD, or where applicable EAD*, for that IRBA exposure; (ii) for all other IRBA exposures to calculate its credit risk-weighted exposure amount, using the following formula:
Credit RWE = Exposure x K x 12.5 where –
(A) “Credit RWE” refers to the credit risk-weighted exposure amount for that IRBA exposure; (B) “K” refers to Kcorp, Ksm, Ksov, Kbank, Ksl, Khv, Kmort, Kqrre, Koret, Kcp, Ksp, Krp, or Kdef, whichever is applicable to that IRBA exposure based on the categorisation in sub-paragraph (b), calculated in accordance with sub-paragraph (c); and (C) “Exposure” refers to EAD, or where applicable EAD*, for that IRBA exposure; and (f) aggregating the credit risk-weighted exposure amounts calculated in accordance with sub-paragraph (e) for all its IRBA exposures.
7.1.11 To avoid doubt, a Reporting Bank must cap the credit risk-weighted exposure
amount calculated in accordance with paragraph 7.1.9(d) or 7.1.10(e), as the case may be, for any transaction for which CRM has been used, to the credit risk-weighted exposure amount applicable to an otherwise identical transaction where such CRM is not used.

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Sub-division 6: Calculation of Credit RWA for Equity Investments in Funds
7.1.12 To calculate its RWA for equity investments in funds, a Reporting Bank must –
(a) apply the exposure measurement requirements in Sub-division 1 of Division 2 of this Part, and Sub-divisions 2 or 3 of Division 2 of this Part to calculate E for an exposure in equity investments in funds; (b) calculate the credit risk-weighted exposure amount of that exposure in equity investments in funds in accordance with Division 5 of this Part; and (c) aggregate the credit risk-weighted exposure amounts calculated in accordance with sub-paragraph (b) for all its exposures in equity investments in funds.
7.1.13 To avoid doubt, a Reporting Bank must cap the credit risk-weighted exposure
amount calculated in accordance with paragraph 7.1.12(b) for any transaction for which CRM has been used, to the credit risk-weighted exposure amount applicable to an otherwise identical transaction where such CRM is not used. Sub-division 7: Calculation of Credit RWA for Securitisation Exposures
7.1.14 To calculate its RWA for a securitisation exposure, a Reporting Bank must –
(a) apply the exposure measurement requirements in Sub-divisions 1, 5 and 9 of Division 2 of this Part and Sub-divisions 2, 3, 6 or 7 of Division 2 of this Part to calculate E, or where applicable E*, for a securitisation exposure; (b) calculate the credit risk-weighted exposure amount for each securitisation exposure, using the following formula:
Credit RWE = Exposure x RW where –
(i) “Credit RWE” refers to the credit risk-weighted exposure amount for that securitisation exposure; (ii) “Exposure” refers to E, or where applicable E* , for that securitisation exposure calculated in accordance with sub-paragraph (a); and (iii) “RW” refers to – (A) the applicable risk weight for an SEC-IRBA exposure determined in accordance with Sub-divisions 3 and 4 of Division 6 of this Part, as adjusted by Sub-division 10 or Sub-division 11 of Division 6 of this Part; (B) the applicable risk weight for an SEC-ERBA exposure determined in accordance with Sub-divisions 3 and 5 of Division

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6 of this Part, as adjusted by Sub-division 10 or Sub-division 11 of Division 6 of this Part; (C) the applicable risk weight for an SEC-IAA exposure determined in accordance with Sub-divisions 3 and 6 of Division 6 of this
Part, as adjusted by Sub-division 10 or Sub-division 11 of
Division 6 of this Part;
(D) the applicable risk weight for an SEC-SA exposure determined in accordance with Sub-divisions 3 and 7 of Division 6 of this
Part, as adjusted by Sub-division 9, Sub-division 10 or Subdivision 11 of Division 6 of this Part; or
(E) 1250% determined in accordance with Sub-division 3 of Division 6 of this Part if the Reporting Bank is unable to use the SEC-IRBA, SEC-ERBA, SEC-IAA or SEC-SA, or where it cannot meet the requirements in paragraph 7.6.8(a) to (c), subject to the maximum risk weights applicable for senior exposures, calculated in accordance with paragraphs 7.1.15 to 7.1.17, and the minimum risk weight applicable for exposures to a NPL securitisation set out in paragraph 7.6.88, as applicable; (c) aggregate the credit risk-weighted exposure amounts calculated in accordance with sub-paragraph (b) for all its securitisation exposures arising from the same securitisation, and in doing so, may cap the credit risk-weighted exposure amount arising from the same securitisation in accordance with paragraphs 7.1.18 to 7.1.22, or 7.6.91, as applicable, and adjust the credit risk-weighted exposure amounts to recognise the effects of credit risk mitigation in accordance with paragraph 7.1.23; and (d) aggregate the credit risk-weighted exposure amounts calculated in accordance with sub-paragraph (c) for all its securitisation exposures across all securitisations. Maximum Risk Weight for Senior Exposures
7.1.15 A Reporting Bank may apply a “look-through” approach to senior securitisation
exposures, where the risk weight applied to a senior securitisation exposure is capped at the exposure weighted-average risk weight applicable to the underlying exposures, provided that the Reporting Bank has knowledge of the composition of the underlying exposures at all times – (a) where the Reporting Bank exclusively uses either the SA(CR) or the IRBA to calculate capital requirements for the underlying pool, the risk weight applied to the senior securitisation exposure is capped at the exposure weighted-average risk weight applicable to the underlying exposures under the SA(CR) or IRBA respectively; and (b) in the case of mixed pools –

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(i) when applying the SEC-IRBA, the risk weight applied to the senior securitisation exposure is capped at the exposure weighted-average risk weight calculated using – (A) the SA(CR) risk weights for the portion of the underlying pool that would constitute an SA pool; and (B) the IRBA risk weights for the portion of the underlying pool that would constitute an IRB pool; and (ii) when applying the SEC-SA, the SEC-ERBA, or the SEC-IAA, the risk weight applied to the senior securitisation exposure is capped at the exposure weighted-average risk weight applicable to the underlying assets under the SA(CR), whether or not the Reporting Bank is able to use the IRBA to calculate their risk weights. The Reporting Bank must calculate the applicable risk weight under the IRBA taking into account the expected loss multiplied by 12.5.
7.1.16 Where the risk weight cap results in a lower risk weight than the floor risk
weight of 15%, a Reporting Bank must apply the risk weight resulting from the cap.
7.1.17 A Reporting Bank must not apply the cap on risk weights described in
paragraphs 7.1.15 to 7.1.16 to resecuritisation exposures.
Maximum Credit Risk-Weighted Exposure Amounts
7.1.18 A Reporting Bank (as an originator of or investor in a securitisation) using the
SEC-IRBA for a securitisation exposure may cap the credit risk-weighted exposure amount for the securitisation exposures it holds in the same securitisation in accordance with paragraph 7.1.20.
7.1.19 A Reporting Bank (as an originator of a securitisation) using the SEC-ERBA, the
SEC-IAA or the SEC-SA for a securitisation exposure may cap the credit risk-weighted exposure amount for the securitisation exposures it holds in the same securitisation in accordance with paragraph 7.1.20.
7.1.20 A Reporting Bank which is capping the credit risk-weighted exposure amount
must apply a maximum aggregated credit risk-weighted exposure for its securitisation exposures in the same securitisation of P x KP x 12.5, with P and KP defined as follows:
(a) P: The largest proportion of interest that the Reporting Bank holds across all tranches of a given pool – (i) if the Reporting Bank’s securitisation exposures all reside in a single tranche of a given securitisation, P equals the proportion (expressed as a percentage) of securitisation exposures that the Reporting Bank holds in that given tranche (calculated as the total nominal amount of the Reporting Bank’s securitisation exposures in the tranche divided by the nominal amount of the tranche); and

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(ii) if the Reporting Bank’s securitisation exposures reside in different tranches of a given securitisation, P equals the maximum proportion of interest across tranches, where the proportion of interest for each of the different tranches is calculated as described above; (b) KP: The capital requirement for the underlying pool – (i) for an IRB pool, KP equals KIRB as calculated in paragraphs 7.6.21 to 7.6.32; (ii) for an SA pool, KP equals KSA as calculated in paragraphs 7.6.63 to 7.6.69; and (iii) for a mixed pool, KP equals the exposure-weighted average capital requirement of the underlying pool using KSA for the proportion of the underlying pool for which the Reporting Bank cannot calculate KIRB, and KIRB for the proportion of the underlying pool for which the Reporting Bank can calculate KIRB.
7.1.21 Despite the maximum risk-weighted exposure cap, a Reporting Bank must
deduct the entire amount of any gain on sale and credit-enhancing interest-only strips arising from the securitisation transaction in accordance with paragraph 6.1.5(f) and (g).
7.1.22 A Reporting Bank must not apply the cap on credit risk-weighted exposure
amounts described in paragraphs 7.1.18 to 7.1.20 to resecuritisation exposures.
7.1.23 A Reporting Bank which is adjusting its credit risk-weighted exposure amounts
to recognise the effects of credit risk mitigation pursuant to paragraph 7.1.14(c) must – [MAS Notice 637 (Amendment) 2024] (a) compute an effective risk weight for each securitisation exposure, using the following formula:
Effective risk weight = Credit RWE / Exposure where – (i) “Effective risk weight” refers to the risk weight applicable to the unprotected portion of the securitisation exposure; (ii) “Credit RWE” refers to the credit risk-weighted exposure amount for that securitisation exposure calculated in accordance with paragraph 7.1.14(a) to (c), after the application of any caps; and (iii) “Exposure” refers to E, or where applicable E*, for that securitisation exposure calculated in accordance with paragraph 7.1.14(a); and (b) recognise the effects of credit risk mitigation in accordance with Subdivision 13 of Division 6 of this Part, using the effective risk weight calculated in sub-paragraph (a) as the risk weight that is applicable to the unprotected portion of the securitisation exposure.

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Division 2: Measurement of Exposures
Sub-division 1: Introduction
7.2.1 A Reporting Bank must apply the exposure measurement requirements set out
in this Division and the standards for prudent valuation set out in Annex 6C to calculate – (a) E, or where applicable E*, for any SA(CR) exposure, exposure in equity investments in funds, SEC-IRBA exposure, SEC-ERBA exposure, SEC-IAA exposure or SEC-SA exposure; and (b) EAD, or where applicable EAD*, for any IRBA exposure.
7.2.2 For the purposes of paragraph 7.2.1(b), a Reporting Bank must comply with
the requirements in Annex 7X for deriving estimates of EAD for such exposures.
7.2.3 A Reporting Bank must consult with the Authority on the appropriate treatment
to apply in the measurement of E or EAD, whichever is applicable, for transactions that have not been addressed in this Division.
7.2.4 A Reporting Bank must calculate –
(a) E, or where applicable E*, for any SA(CR) exposure, SEC-IRBA exposure, SEC-ERBA exposure, SEC-IAA exposure or SEC-SA exposure, net of any – (i) specific allowance (including partial write-offs) attributable to such SA(CR) exposure, SEC-IRBA exposure, SEC-ERBA exposure, SEC-IAA exposure or SEC-SA exposure, as determined in accordance with the Accounting Standards; and (ii) purchase price discount attributable to such SEC-IRBA exposure, SEC-ERBA exposure, SEC-IAA exposure or SEC-SA exposure; and (b) EAD, or where applicable EAD*, for any IRBA exposure gross of any specific allowance or partial write-offs attributable to such IRBA exposure as determined in accordance with the Accounting Standards.
7.2.5 For the purposes of paragraph 7.2.4(b), the Reporting Bank must ensure that
the EAD on drawn amounts is not less than the sum of – (a) the amount by which a Reporting Bank’s regulatory capital would be reduced if the exposure were written-off fully; and (b) any specific allowances and partial write-offs. The difference between the EAD and the sum of (a) and (b), where positive, is referred to as a discount. To avoid doubt, the Reporting Bank must ensure that the calculation of EAD, or where applicable EAD*, and the calculation of IRBA RWA, is independent of any discounts.

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Sub-division 2: Measurement of E or EAD for On-balance Sheet Assets
7.2.6 Subject to paragraph 7.2.9, a Reporting Bank must ensure that E or EAD,
whichever is applicable, for each on-balance sheet asset is the carrying amount of the asset as determined in accordance with the Accounting Standards.201 The Reporting Bank must ensure that E or EAD, whichever is applicable, is equal to the fair value of that asset presented in the balance sheet, except that – (a) for any asset held at cost, the Reporting Bank must ensure that E or EAD, whichever is applicable, is equal to the cost of the asset presented in the balance sheet; and (b) for any land and building asset or investment property where the Reporting Bank has recognised the revaluation surpluses or accumulated revaluation gains as CET1 Capital pursuant to paragraph 6.1.1(e), the Reporting Bank must ensure that E or EAD, whichever is applicable, includes only the portion of revaluation surpluses or accumulated revaluation gains that have been included as CET1 Capital (equivalent to the sum of historical cost and 45% of the revaluation surpluses or accumulated revaluation gains, less depreciation and any allowance for impairment).
7.2.7 In the case of a lease where the Reporting Bank is the lessor and is exposed to
residual value risk (i.e. potential loss due to the fair value of the leased asset declining below the estimate of its residual value reflected on the balance sheet of the Reporting Bank at lease inception), the Reporting Bank must calculate – (a) an exposure to the lessee equivalent to the discounted lease payment stream; and (b) an exposure to the residual value of the leased assets equivalent to the estimate of the residual value reflected in the balance sheet of the Reporting Bank.
7.2.8 To avoid doubt, a Reporting Bank must calculate E or EAD of any asset on the
balance sheet of the Reporting Bank that is – (a) lent; or (b) posted as collateral, where the credit risk of the asset remains with the Reporting Bank, in accordance with paragraph 7.2.4. 201 A Reporting Bank should allocate any foreign exchange transaction or translation gain or loss from a foreign currency-denominated on-balance sheet item as well as interest earned on a fixed income instrument to the exposure to which it accrues.

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7.2.9 A Reporting Bank may recognise the effect of a qualifying on-balance sheet
netting agreement for loans and deposits. However, the Reporting Bank must not recognise the effect of netting agreements relating to all other types of on-balance sheet assets and liabilities. To avoid doubt, this prohibition on the recognition of netting agreements does not apply to the calculation of E or EAD, whichever is applicable, for presettlement counterparty exposures arising from derivative transactions and long settlement transactions under the SA-CCR set out in Annex 7D.
7.2.10 For the purposes of paragraph 7.2.9, a Reporting Bank must –
(a) calculate E or EAD, whichever is applicable, for loans; and (b) calculate E* or EAD*, whichever is applicable, as the net exposure of loans and deposits, by treating deposits as cash collateral and in accordance with paragraph 1.1 of Annex 7J, subject to all of the following:
(i) all applicable haircuts in paragraph 1.1 of Annex 7J are zero, except where there is a currency mismatch between the loans and deposits covered under the qualifying on-balance sheet netting agreement; (ii) where there is a currency mismatch between the loans and deposits held, the Reporting Bank must reduce the amount of exposure to be netted by applying a haircut in accordance with paragraphs 2.4 and 2.5 of Annex 7J, and apply a 10-business day holding period; (iii) where there is a maturity mismatch between the loans and deposits covered under the qualifying on-balance sheet netting agreement, the Reporting Bank must comply with the requirements set out in Section 7 of Annex 7H.

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Sub-division 3: Measurement202 of E or EAD for Off-balance Sheet Items Other than CCR Exposures
7.2.11 For an off-balance sheet item (other than a CCR exposure), which is an SA(CR)
exposure, an exposure in equity investments in funds, or an exposure under the F-IRBA, a Reporting Bank must calculate E or EAD, whichever is applicable, by multiplying the notional amount with the applicable standardised CCF set out in Table 7B-1.
7.2.12 A Reporting Bank posting collateral for any transaction other than a CCR
exposure must apply a 100% CCF to the fair value of the collateral. 203 To avoid doubt, a Reporting Bank must calculate E or EAD for such posted collateral in addition to the calculation of E or EAD pursuant to paragraph 7.2.8, where applicable.
7.2.13 For an off-balance sheet item (other than a CCR exposure), which is an
exposure under the A-IRBA, or the IRBA for the IRBA retail asset class, a Reporting Bank must calculate EAD as follows:
(a) in the case of an undrawn commitment to a revolving loan to extend credit, purchase assets or issue credit substitutes, where all of the following conditions are met:
(i) the exposure is not subject to a standardised CCF of 100% as set out in Table 7B-1; (ii) the Reporting Bank meets the minimum requirements for estimating EAD as set out in Annex 7X, the Reporting Bank must calculate – (A) EAD of the off-balance sheet item by multiplying the notional amount of the item with the Reporting Bank’s own internal estimates of CCFs; or 202 A Reporting Bank should record a commitment (as defined in Annex 2A) as an exposure for regulatory capital purposes on the date at which it enters into the legal contract or agreement with the obligor, except in the following cases:
(a) where the Reporting Bank faces operational constraints in recording the commitment immediately, such as checking that the legal contract or agreement is in order, such delay should not exceed 15 business days; (b) where the Reporting Bank intends to recognise the effects of CRM of collateral, and the disbursement of the credit facility is conditional on such recognition being achieved, the Reporting Bank should record the commitment in respect of the credit facility on the date at which it is first able to recognise the credit risk mitigating effects of any collateral which meets all the requirements for recognition of collateral under Annex 7H; (c) where the commitment is in respect of a credit facility to an obligor which is to be used for the purposes of repaying an existing credit facility issued by the Reporting Bank to the same obligor, such as for refinancing, the Reporting Bank should record the commitment on the date at which the existing credit exposure will be repaid. In the case where the amount for the commitment exceeds the outstanding amount to be repaid for the existing credit exposure, the Reporting Bank should recognise the difference on the date at which the legal contract or agreement or commitment is entered into by the Reporting Bank, subject to sub-paragraphs (a) and (b). To avoid doubt, this does not affect the measurement of E or EAD for the commitment. 203 This is to account for the counterparty credit risk arising from the default of the obligor receiving such collateral.

Monetary Authority of Singapore 7-15
(B) EAD of the total facility, consisting of both the on-balance sheet asset, and the off-balance sheet item, using the Reporting Bank’s own internal estimates of total facility EAD; (b) in any other case, the Reporting Bank must calculate EAD by multiplying the notional amount with the applicable standardised CCF set out in Table 7B-1. 204
7.2.14 In the case where a Reporting Bank uses its own internal estimates to calculate
EAD in accordance with paragraph 7.2.13(a), the Reporting Bank must determine EAD as follows for exposures other than an exposure in the sovereign asset sub-class under paragraph 7.4.42(c):
(a) EAD for foreign exchange and interest rate commitments within a Reporting Bank’s IRBA retail asset class, if any, must be determined in accordance with paragraph 7.2.11; (b) if the EAD of the off-balance sheet item calculated under paragraph 7.2.13(a)(A) is lower than 50% of the exposure measurement that would have been calculated for the same off-balance sheet item under paragraph 7.2.11, the Reporting Bank must use 50% of the exposure measurement that would have been calculated for the same off-balance sheet item under paragraph 7.2.11 as the EAD to calculate Credit RWE for that IRBA exposure under paragraph 7.1.5(e)(ii); (c) if the EAD of the total facility calculated under paragraph 7.2.13(a)(B) is lower than the sum of – (i) the on-balance sheet amount that would have been calculated under Sub-division 2 of this Division; and (ii) 50% of the exposure measurement that would have been calculated for the off-balance sheet amount under paragraph 7.2.11, the Reporting Bank must use the sum of (c)(i) and (c)(ii) as the EAD to calculate Credit RWE for that IRBA exposure under paragraph 7.1.5(e)(ii).
7.2.15 For an off-balance sheet item (other than a CCR exposure) which is a
securitisation exposure, a Reporting Bank must calculate E, by multiplying the notional amount with the applicable CCF set out in Annex 7C.
7.2.16 For the purposes of this Sub-division –
(a) the notional amount of an off-balance sheet item refers to the amount which has been committed but is as yet undrawn; and 204 For example, this paragraph would apply to any of the following:
(a) an undrawn commitment to a non-revolving loan; (b) an off-balance sheet item that is subject to a standardised CCF of 100%; (c) an exposure where the Reporting Bank does not meet the minimum requirements for estimating EAD as set out in Annex 7X.

Monetary Authority of Singapore 7-16
(b) a Reporting Bank which is exposed to the risk of the underlying securities or commodities in – (i) an OTC derivative transaction; (ii) an exchange-traded derivative transaction; (iii) a long settlement transaction; or (iv) an SFT, where the transaction is in substance similar to a forward purchase or credit substitute, must calculate E or EAD, whichever is applicable, for such an exposure in accordance with this Sub-division.
7.2.17 For the purposes of paragraph 7.2.16(a), a Reporting Bank must measure the
notional amount of an off-balance sheet item denominated in a foreign currency, based on the current exchange rate. The Reporting Bank must apply the CCF to the lower of the value of the unused committed credit line, and the value which reflects any possible constraining availability of the facility 205. Where a Reporting Bank contends that the availability of a facility is constrained, the Reporting Bank must have sufficient line monitoring and management procedures to support this contention.
7.2.18 To avoid doubt, if a Reporting Bank has securitised only the drawn balances of
revolving loans, the Reporting Bank must hold capital against the undrawn balances associated with the securitised exposures, and must calculate E or EAD, whichever is applicable, based on the applicable CCF set out in Annex 7B. For the purposes of this paragraph, a securitisation of revolving loans is a securitisation in which one or more underlying exposures represent, directly or indirectly, current or future draws on a revolving loan206 .
7.2.19 To avoid doubt, where a Reporting Bank has provided unfunded credit
protection via a total rate of return swap, the Reporting Bank must calculate E or EAD, whichever is applicable, as the notional amount of the underlying reference credit exposure for which the Reporting Bank is providing protection adjusted for any payments received from or made to the protection buyer and recognised in the profit and loss account of the Reporting Bank. Where a Reporting Bank has provided unfunded credit protection via a credit default swap, the Reporting Bank must calculate E or EAD, whichever is applicable, as the notional amount of the underlying reference credit exposure for which the Reporting Bank is providing protection. 205 An example is the existence of a ceiling on the potential lending amount which is related to an obligor’s reported cash flow. 206 Examples of revolving loans include credit card exposures, home equity lines of credit, commercial lines of credit, and other lines of credit.

Monetary Authority of Singapore 7-17
Sub-division 4: Recognition of Eligible Financial Collateral for On-balance Sheet Assets and Off-balance Sheet Items Other than Exposures in Equity Investments in Funds, Securitisation Exposures, and CCR Exposures
7.2.20 A Reporting Bank which has taken eligible financial collateral for any transaction
other than an exposure in equity investments in funds, a securitisation exposure, or a CCR exposure, may recognise the effect of such collateral in accordance with paragraphs 7.2.21 to 7.2.26.
7.2.21 A Reporting Bank that does not use the IRBA may use either the FC(SA) or the
FC(CA) to recognise the effect of eligible financial collateral. The Reporting Bank must apply the chosen approach consistently to the entire banking book and must not use a combination of both approaches. A Reporting Bank using the IRBA must not use the FC(SA).
7.2.22 A Reporting Bank using the SA(CR) and the FC(SA) may recognise the effect of
eligible financial collateral in accordance with Sub-division 4 of Division 3 of this Part. Paragraphs 7.2.23 to 7.2.26 do not apply where a Reporting Bank uses the FC(SA).
7.2.23 A Reporting Bank using the SA(CR) and the FC(CA) may calculate E*, the
SA(CR) exposure adjusted for eligible financial collateral, in accordance with Annex 7J and substitute E* for E when calculating the credit risk-weighted exposure amount for that SA(CR) exposure under Sub-division 3 of Division 1 of this Part.
7.2.24 A Reporting Bank using the F-IRBA may calculate LGD* for IRBA exposures in
accordance with paragraphs 7.4.75 to 7.4.79 to recognise the effect of eligible financial collateral.
7.2.25 A Reporting Bank using the supervisory slotting criteria and the FC(CA) may
calculate EAD*, the IRBA exposure adjusted for eligible financial collateral, in accordance with Annex 7J and substitute EAD* for EAD when calculating the credit risk-weighted exposure amount and EL amount for that IRBA exposure under Sub-division 4 of Division 1 and Sub-division 14 of Division 4 of this Part, respectively. A Reporting Bank may apply this treatment only if the CRM of the eligible financial collateral has not been taken into consideration in assigning the exposure to internal obligor grades as set out in paragraph 7.4.124.

7.2.26 A Reporting Bank using the A-IRBA or the IRBA for the IRBA retail asset class
may take collateral into account when deriving its own estimates of LGD. Sub-division 5: Recognition of Eligible Financial Collateral for Securitisation Exposures
7.2.27 A Reporting Bank which has taken eligible financial collateral for a securitisation
exposure may recognise the effect of such collateral used to hedge the credit risk of a securitisation exposure, in accordance with paragraphs 7.2.28 to 7.2.30. A Reporting Bank may recognise collateral pledged by an SPE.
7.2.28 A Reporting Bank that does not use the IRBA, the SEC-IRBA and the SEC-IAA
may use either the FC(SA) or the FC(CA) to recognise the effect of eligible financial collateral. The Reporting Bank must apply the chosen approach consistently to the entire

Monetary Authority of Singapore 7-18 banking book and must not use a combination of both approaches. A Reporting Bank using the IRBA, SEC-IRBA, or SEC-IAA must not use the FC(SA).
7.2.29 A Reporting Bank using the SEC-ERBA or SEC-SA and the FC(SA) may recognise
the effect of eligible financial collateral in accordance with Sub-division 13 of Division 6 of this Part. Paragraph 7.2.30 does not apply to a Reporting Bank using the FC(SA).
7.2.30 A Reporting Bank using the SEC-IRBA, SEC-ERBA, SEC-IAA or SEC-SA and the
FC(CA) may calculate E*, the SEC-IRBA, SEC-ERBA, SEC-IAA or SEC-SA exposure adjusted for eligible financial collateral, in accordance with Annex 7J and substitute E* for E when calculating the credit risk-weighted exposure amount for that SEC-IRBA, SEC-ERBA, SEC-IAA or SEC-SA exposure under Sub-division 7 of Division 1 of this Part. Sub-division 6: Measurement of E or EAD for Pre-settlement Counterparty Exposures Arising from OTC Derivative Transactions, Exchangetraded Derivative Transactions and Long Settlement Transactions, Other than Transactions Covered by a Qualifying Cross-Product Netting Agreement
7.2.31 Subject to paragraph 7.2.32, for each OTC derivative transaction, exchangetraded derivative transaction or long settlement transaction which is not covered by a
qualifying cross-product netting agreement, a Reporting Bank must calculate E or EAD, whichever is applicable, for the pre-settlement counterparty exposure arising from that OTC derivative transaction, exchange-traded derivative transaction or long settlement transaction using one of the following methods:
(a) the SA-CCR set out in Annex 7D;
(b) the CCR internal models method set out in Annex 7E.
7.2.32 For each counterparty, a Reporting Bank must ensure that the E or EAD,
whichever is applicable, for each OTC derivative transaction calculated in accordance with paragraph 7.2.31, is the greater of zero and the difference between the sum of E or EAD, whichever is applicable, across all netting sets with the counterparty and the CVA loss. The Reporting Bank must calculate the CVA loss without taking into account any offsetting debit valuation adjustments which have been deducted in the calculation of CET1 Capital in accordance with paragraph 6.1.5(h). For the purposes of calculating the CVA risk capital requirement in Division 5 of Part VIII, a Reporting Bank must not reduce EAD by CVA losses. Where a Reporting Bank uses a combination of the SA-CCR and CCR internal models method to calculate its E or EAD, whichever is applicable, to a single counterparty, the Reporting Bank must allocate separately (with no double-counting) collateral posted by the counterparty, for the purposes of calculating its E or EAD, whichever is applicable, under each of the respective methods.
7.2.33 A Reporting Bank must not use the CCR internal models method unless it has
received the approval of the Authority to do so.
7.2.34 Regardless of the method used by a Reporting Bank for calculating E or EAD,
whichever is applicable, for the pre-settlement counterparty exposure arising from OTC derivative transactions, exchange-traded derivative transactions and SFTs, a Reporting Bank may determine E or EAD, whichever is applicable, for the pre-settlement

Monetary Authority of Singapore 7-19 counterparty exposure arising from long settlement transactions using either of the methods set out in paragraph 7.2.31.
7.2.35 To avoid doubt, in calculating E for a securitisation exposure which arises from
a derivative transaction other than a credit risk derivative transaction, a Reporting Bank must calculate E in accordance with this Sub-division. Sub-division 7: Measurement of E or EAD for Pre-Settlement Counterparty Exposures Arising from SFTs, Other than Transactions Covered by a Qualifying Cross-Product Netting Agreement
7.2.36 A Reporting Bank must treat an SFT as a collateralised transaction for the
purposes of this Notice, despite the wide range of structures which could be used for SFTs.
7.2.37 A Reporting Bank must calculate E or EAD, whichever is applicable, for a presettlement counterparty exposure arising from an SFT, other than an exposure covered
by a qualifying cross-product netting agreement – (a) in accordance with paragraphs 7.2.41 to 7.2.47; or (b) using the CCR internal models method set out in Annex 7E.
7.2.38 A Reporting Bank must not use the CCR internal models method unless it has
received the approval of the Authority to do so.
7.2.39 A Reporting Bank on either side of an SFT must hold capital for the SFT.207
7.2.40 To avoid doubt, a Reporting Bank must calculate the E or EAD, as the case may
be, of the on-balance sheet leg of an SFT under Sub-division 2 of this Division.
7.2.41 Unless a Reporting Bank is using the CCR internal models method and subject
to paragraph 7.2.42, it must determine E or EAD, whichever is applicable, for a presettlement counterparty exposure arising from an SFT which is not covered by a qualifying cross-product netting agreement as follows:
(a) in the case where the Reporting Bank has lent collateral to a counterparty or sold collateral to a counterparty with a commitment to repurchase those collateral at a specified price on a specified future date, the latest fair value of the collateral lent or sold; (b) in the case where the Reporting Bank has lent cash to a counterparty through the borrowing of collateral from the counterparty or paid cash for the purchase of collateral from a counterparty with a commitment to resell those collateral at a specified price on a specified future date, the amount of cash lent or paid.
7.2.42 Despite paragraph 7.2.41(a), where a Reporting Bank is using the FC(CA) for
the recognition of eligible financial collateral, for SFTs where a Reporting Bank has lent or 207 For example, a Reporting Bank must hold capital for repos and reverse repos, securities lending and securities borrowing transactions.

Monetary Authority of Singapore 7-20 sold non-eligible financial collateral to a counterparty, a Reporting Bank must determine E* or EAD* in accordance with Annex 7J, and substitute E* for E and EAD* for EAD when calculating the credit risk-weighted exposure amount for that SA(CR) exposure or IRBA exposure under Sub-division 5 of Division 1 of this Part.
7.2.43 A Reporting Bank which has taken eligible financial collateral for any SFT where
the pre-settlement counterparty exposure is determined in accordance with paragraph
7.2.41 may recognise the effect of such collateral in accordance with paragraphs 7.2.44
to 7.2.47.
7.2.44 A Reporting Bank that does not use the IRBA may use either the FC(SA) or the
FC(CA) to recognise the effect of eligible financial collateral for any SFT. The Reporting Bank must apply the chosen approach consistently to the entire banking book and must not use a combination of both approaches. A Reporting Bank using the IRBA must not use the FC(SA) to recognise the effect of eligible financial collateral for any SFT.
7.2.45 A Reporting Bank using the SA(CR) and FC(SA) may recognise the effect of
eligible financial collateral for any SFT in accordance with Sub-division 4 of Division 3 of this Part. Paragraphs 7.2.46 to 7.2.47 do not apply where a Reporting Bank uses the FC(SA). [MAS Notice 637 (Amendment) 2024]
7.2.46 A Reporting Bank which has taken eligible financial collateral for any SFT that
is not covered by a qualifying bilateral netting agreement, or which has taken eligible financial collateral for any SFT that is covered by a qualifying bilateral netting agreement but for which the Reporting Bank has elected not to recognise the netting effects for the purposes of calculating regulatory capital requirements, may – (a) if it is using the SA(CR) and the FC(CA), calculate E*, the SA(CR) exposure adjusted for eligible financial collateral, in accordance with Annex 7J, and substitute E* for E when calculating the credit risk-weighted exposure amount for that SA(CR) exposure under Sub-division 5 of Division 1 of this
Part; and
(b) if it is using the IRBA (whether F-IRBA, A-IRBA or IRBA for the IRBA retail asset class), calculate EAD* in accordance with Annex 7J (if the Reporting Bank is using the FC(CA)) or Annex 7F (if the Reporting Bank is using VaR models), and substitute EAD* for EAD when calculating the credit riskweighted exposure amount for that IRBA exposure under Sub-division 5 of Division 1 of this Part.
7.2.47 A Reporting Bank which has taken eligible financial collateral for an SFT that is
covered by a qualifying bilateral netting agreement may – (a) if it is using the SA(CR) and the FC(CA), calculate E*, the SA(CR) exposure adjusted for eligible financial collateral for all its SA(CR) exposures to any single counterparty covered by the qualifying bilateral netting agreement, in accordance with Annex 7J, and substitute E* for E when calculating the credit risk-weighted exposure amount for its SA(CR) exposures to that counterparty under Sub-division 5 of Division 1 of this Part; and

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(b) if it is using the IRBA (whether F-IRBA, A-IRBA or IRBA for the IRBA retail asset class), calculate EAD*, the IRBA exposure adjusted for eligible financial collateral for all its IRBA exposures to any single counterparty covered by the qualifying bilateral netting agreement, in accordance with
Annex 7J (if the Reporting Bank is using the FC(CA)), or Annex 7F (if the
Reporting Bank is using VaR models), and substitute EAD* for EAD when calculating the credit risk-weighted exposure amount for its IRBA exposures to that counterparty under Sub-division 5 of Division 1 of this
Part.
7.2.48 Where a Reporting Bank, acting as an agent of a party (the “third party”),
arranges a repo-style transaction, a commodities lending transaction or a commodities borrowing transaction between a counterparty and a third party and provides a guarantee to the counterparty that the third party will perform on its obligations, the risk to the Reporting Bank is the same as if the Reporting Bank had entered into the transaction as a principal. In such circumstances, the Reporting Bank must calculate capital requirements as if it were itself the principal to the repo-style transaction, a commodities lending transaction or a commodities borrowing transaction. Sub-division 8: Measurement of E or EAD for Pre-Settlement Counterparty Exposures Arising from OTC Derivative Transactions, Long Settlement Transactions and SFTs Covered by a Qualifying CrossProduct Netting Agreement
7.2.49 Subject to paragraph 7.2.50, a Reporting Bank must calculate E or EAD,
whichever is applicable, for any pre-settlement counterparty exposure arising from any OTC derivative transaction, long settlement transaction or SFT to a single counterparty that is covered by a qualifying cross-product netting agreement, using the CCR internal models method set out in Annex 7E.
7.2.50 For each counterparty, a Reporting Bank must ensure that the E or EAD,
whichever is applicable, for each OTC derivative transaction calculated in accordance with paragraph 7.2.49, is the greater of zero and the difference between the sum of E or EAD, whichever is applicable, across all netting sets with the counterparty and the CVA loss. The Reporting Bank must calculate the CVA loss without taking into account any offsetting debit valuation adjustments which have been deducted in the calculation of CET1 Capital in accordance with paragraph 6.1.5(h). For the purposes of calculating the CVA risk capital requirement in Division 5 of Part VIII, a Reporting Bank must not reduce EAD by CVA losses.
7.2.51 A Reporting Bank must not use the CCR internal models method unless it has
received the approval of the Authority to do so.
Sub-division 9: Exceptions to the Measurement of E or EAD
7.2.52 Despite paragraphs 7.2.1 to 7.2.51, a Reporting Bank may attribute a value of
zero to E or EAD, whichever is applicable, for –

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(a) any pre-settlement counterparty exposure arising from any credit derivative which a Reporting Bank may recognise as eligible credit protection for a banking book exposure or another CCR exposure; and (b) any pre-settlement counterparty exposure arising from any sold credit default swap in the banking book, where the credit default swap is treated as credit protection sold by the Reporting Bank, and subject to credit risk capital requirements for the full notional amount.
7.2.53 For the purposes of calculating the CVA risk capital requirement in Division 5 of
Part VIII, the Reporting Bank must not attribute a value of zero to E or EAD, whichever is
applicable, for the pre-settlement counterparty exposure to the protection provider, arising from a credit derivative which the Reporting Bank recognises as an eligible hedge, in the calculation of the CVA risk capital requirement.

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Division 3: SA(CR)
Sub-division 1: Categorisation of SA(CR) Exposures
7.3.1 A Reporting Bank must categorise any SA(CR) exposure into one of the
following asset classes and where applicable, one of the following asset sub-classes, under SA(CR):
(a) cash items, which consist of –
(i) cash and cash equivalents, including cheques, drafts and other items drawn on other banks, merchant banks or finance companies that are either payable immediately upon presentation or that are in the process of collection; and (ii) gold bullion held in the vaults of the Reporting Bank or on an allocated basis in the vaults of another entity to the extent that it is backed by gold bullion liabilities; (b) central government and central bank asset class, which consists of any exposure to a central government, a central bank, the Bank for International Settlements, the International Monetary Fund, the European Central Bank, the European Union, the European Stability Mechanism, or the European Financial Stability Facility; (c) PSE asset class, which consists of any exposure to a PSE; (d) MDB asset class, which consists of any exposure to an MDB; (e) bank asset class, which consists of any exposure to – (i) a bank; (ii) a merchant bank; (iii) a finance company; (iv) a financial holding company that has a subsidiary that is a bank incorporated in Singapore and is a predominantly banking DFHC; or (v) a securities firm or other financial institution incorporated in a foreign country or jurisdiction, if the Reporting Bank has determined that such a securities firm or financial institution is classified and riskweighted as a bank under the regulatory capital requirements for banks in that foreign country or jurisdiction, unless a published, international assessment 208 , as notified by the Authority to the Reporting Bank, has identified that the class of securities firms or financial institutions to which such a securities firm or financial institution belongs, is not subject to prudential standards and supervision equivalent to those applied to banks, 208 For example, the BCBS’ Regulatory Consistency Assessment Programme.

Monetary Authority of Singapore 7-24 but excludes any exposure categorised in sub-paragraph (f) or (h); (f) covered bond asset class, which consists of any exposure which is an eligible covered bond; (g) corporate asset class, which consists of any exposure to any corporation, partnership, limited liability partnership, sole proprietorship, trust or fund (but excludes exposures categorised in sub-paragraphs (a) to (f) and (h) to (k), and exposures to individuals), and which consists of the following asset sub-classes:
(i) general corporate asset sub-class, which consists of any exposure in the corporate asset class that does not belong to an asset sub-class set out in sub-paragraphs (g)(ii) and (g)(iii); (ii) corporate SME asset sub-class, which consists of any exposure in the corporate asset class to a small business; (iii) specialised lending asset sub-class, which consists of any exposure in the corporate asset class meeting all of the following characteristics, either in legal form or economic substance209:
(A) the exposure is within the definitions of project finance, object finance or commodities finance in paragraph 7.3.7; (B) the obligor has few or no other material assets or activities and therefore little or no independent capacity to repay the obligation, apart from the income that it receives from the assets being financed; (C) for the purposes of sub-paragraph (g)(iii)(B), the primary source of repayment of the obligation is the income generated by the assets, rather than the independent capacity of the broader commercial enterprise of the obligor; (D) the terms of the obligation give the Reporting Bank a substantial degree of control over the assets and the income that such assets generate; (h) equity and subordinated debt asset class, which consists of any exposure which is – (i) a subordinated debt as defined in paragraph 7.3.8; (ii) an equity exposure as defined in paragraph 7.3.9; or (iii) a regulatory capital instrument as defined in paragraph 7.3.14, 209 Such an exposure is typically to an entity (including an SPE) which was created specifically to finance or operate physical assets or both.

Monetary Authority of Singapore 7-25 issued by a bank, corporation, partnership, limited liability partnership, sole proprietorship, trust, fund, or any type of business vehicle where – (A) the exposure is not required to be deducted in the calculation of any one of the following:
(I) CET1 Capital;
(II) AT1 Capital;
(III) Tier 2 Capital; and
(B) the exposure is not risk-weighted at 250% pursuant to paragraph 6.1.5(p)(iii) or 400% pursuant to paragraph 6.1.6; (i) regulatory retail asset class, which consists of any exposure meeting all of the following conditions (but excludes exposures that are derivatives or securities (including bonds and equities), whether listed or not, and any exposure categorised in sub-paragraph (k)):
(i) the exposure is to an individual, a group of individuals, or a small business; (ii) the exposure takes the form of any of the following:
(A) revolving loans, including credit cards, charge cards and overdrafts; (B) personal term loans and leases, including instalment loans, vehicle loans and leases, student and educational loans, and personal finance; (C) small business credit facilities and commitments; (iii) the total exposure to any obligor or group of obligors, pursuant to paragraph 7.3.16, regardless of whether the exposure is defaulted, is not more than S$2 million; (iv) the total exposure to any obligor or group of obligors, pursuant to paragraph 7.3.16, is less than or equal to 0.2% of the sum of exposures categorised in sub-paragraph (i) and exposures categorised in sub-paragraph (j) that meet the conditions in subparagraphs (i)(i), (i)(ii) and (i)(iii), after excluding exposures that are defaulted, and such regulatory retail asset class consists of the following asset subclasses:
(A) regulatory retail transactor, which refers to an exposure in the regulatory retail asset class to an obligor in relation to revolving loans including credit cards and charge cards where the billed balance has been repaid in full at or before each scheduled

Monetary Authority of Singapore 7-26 repayment date for the previous 12 months, or in relation to overdrafts that have not been drawn down over the previous 12 months; (B) regulatory retail non-transactor, which refers to any other exposure in the regulatory retail asset class that is not a regulatory retail transactor, including any exposure with less than 12 months of repayment history; (j) other retail asset class, which consists of any exposure to an individual or a group of individuals other than exposures categorised in sub-paragraph (i) or (k); (k) real estate asset class, which consists of any exposure that is secured by real estate and which consists of the following asset sub-classes:
(i) ADC asset sub-class, which consists of any exposure in the real estate asset class to companies or SPEs financing any – (A) land acquisition for development, or development and construction, purposes; or (B) development, or development and construction, of any RRE or CRE, but does not include an exposure to a company or SPE financing any acquisition of forest or agricultural land, where there is no planning consent and no intention from the company or SPE to apply for planning consent; (ii) regulatory real estate asset sub-class, which consists of any exposure in the real estate asset class meeting all the conditions in paragraph 7.3.17; (iii) other real estate asset sub-class, which consists of any exposure in the real estate asset class other than exposures categorised in subparagraph (k)(i) or (k)(ii); (l) other exposures asset class, which consists of any exposure which does not fall within any of the categories in sub-paragraphs (a) to (k). This includes – (i) any exposure that is risk-weighted at 250% pursuant to paragraph 6.1.5(p)(iii); (ii) any exposure that is risk-weighted at 400% pursuant to paragraph 6.1.6; (iii) in the case where the Reporting Bank is a lessor, any exposure to the residual value of leased assets calculated in accordance with paragraph 7.2.7(b); and

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(iv) a right-of-use asset where the Reporting Bank is a lessee and the underlying asset is a tangible asset.
7.3.2 For the purposes of paragraph 7.3.1(f), an eligible covered bond refers to a
covered bond that meets all of the following conditions at the issuance date of the covered bond and throughout its remaining maturity:
(a) the cover pool of the covered bond consists of assets that constitute – (i) exposures which would fall within the asset classes in paragraph 7.3.1(b), (c) or (d), or are guaranteed by the entities referred to in those paragraphs; (ii) regulatory RRE exposures which would fall within the regulatory real estate asset sub-class in paragraph 7.3.1(k)(ii) with a loan-to-value ratio (“LTV”) of 80% or lower; (iii) regulatory CRE exposures which would fall within the regulatory real estate asset sub-class in paragraph 7.3.1(k)(ii) with an LTV of 60% or lower; or (iv) exposures which would fall within the bank asset class in paragraph 7.3.1(e), or are guaranteed by entities referred to in paragraph 7.3.1(e), and which would qualify for a 30% or lower risk weight under paragraphs 7.3.52 to 7.3.63, provided that such exposures do not in aggregate exceed 15% of the relevant covered bond issuance; (b) the nominal value of the cover pool assigned to the covered bond by its issuer exceeds the nominal outstanding value of the covered bond issuance (“over-collateralisation requirement”) by at least 10%210, and for the purposes of meeting this over-collateralisation requirement of at least 10% – (i) where the relevant legislative framework governing the issuance of such covered bonds does not stipulate an over-collateralisation requirement of at least 10%, the Reporting Bank must ensure that the issuer of the covered bond publicly discloses on a regular basis that the cover pool meets the over-collateralisation requirement of 10% at all times; and (ii) in addition to the primary assets set out in sub-paragraph (a), the assets used to meet this over-collateralisation requirement may include substitution assets that are cash or short-term liquid and high quality assets held in substitution of the primary assets to top up the cover pool for management purposes, and derivatives entered into for the purposes of hedging the risks arising in the covered bond programme; 210 For this purpose, the value of the cover pool does not need to be that required by the relevant legislative framework governing the issuance of such covered bonds.

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(c) the Reporting Bank can demonstrate to the Authority that – (i) it receives portfolio information at least on – (A) the value of the cover pool and outstanding covered bonds; (B) the geographical distribution and type of assets in the cover pool, loan size, interest rate and currency risks; (C) the maturity structure of assets in the cover pool and covered bonds; and (D) the percentage of loans more than 90 days past due; and (ii) the issuer has made, or has undertaken to make, the information referred to in sub-paragraph (c)(i) available to the Reporting Bank at least semi-annually.
7.3.3 To avoid doubt, a Reporting Bank must categorise an exposure to a securities
firm or other financial institution which does not fall within paragraph 7.3.1(e)(v) under the corporate asset class in paragraph 7.3.1(g).
7.3.4 For the purposes of determining whether a corporation, partnership, limited
liability partnership, sole proprietorship, trust, or fund ("business”) has a reported annual revenue of less than or equal to S$100 million, and therefore whether an SA(CR) exposure to such a business is to be categorised under the corporate SME asset sub-class, the Reporting Bank must – (a) if the business is part of a group of companies as defined in section 209A of the Companies Act 1967, use the reported annual consolidated revenue of the group of companies; (b) have in place rigorous information gathering and timely updating processes to ensure that the reported annual revenue figure used is timely and relevant; (c) use an audited reported annual revenue figure, but where a business is established in a country or jurisdiction where the legislation governing the preparation of the business’s financial statements does not require audited financial statements to be maintained, the Reporting Bank may use unaudited accounts to ascertain the reported annual revenue figure; (d) subject unaudited accounts used to ascertain the reported annual revenue figures under sub-paragraph (c) to an internal or external independent verification conducted on an annual basis; (e) use a reported annual revenue figure taken from the most recent full-year financial statements, which must be for a financial period ending not more than 21 months before the time when the credit risk-weighted exposure

Monetary Authority of Singapore 7-29 amount for that SA(CR) exposure is calculated, unless paragraph 7.3.5 applies211; and (f) not categorise an exposure under the corporate SME asset sub-class if it becomes aware of any event after the date of the financial statements referred to in sub-paragraph (e) that would reasonably cause an adjustment of the reported annual revenue of the business such that it is more than S$100 million.
7.3.5 Despite paragraph 7.3.4(e), where subsequent to the Reporting Bank’s initial
categorisation of an SA(CR) exposure into the corporate SME asset sub-class, a Reporting Bank is unable to obtain updated financial statements of the business, the Reporting Bank may use a reported annual revenue figure taken from full-year financial statements which are for a financial period ending more than 21 months before the time when the credit risk-weighted exposure amount for that SA(CR) exposure is calculated. In such a case, the Reporting Bank may continue to categorise such an exposure under the corporate SME asset sub-class, but must risk-weight the exposure in accordance with paragraphs 7.3.67 to 7.3.70.
7.3.6 For the purposes of paragraphs 7.3.1(g), 7.3.1(h) and 7.3.4, “fund” includes
any collective investment scheme or closed-end fund.
7.3.7 For the purposes of paragraph 7.3.1(g)(iii)(A), –
(a) “Project finance” refers to the method of funding in which the Reporting Bank looks primarily to the revenues generated by a single project, both as a source of repayment and as security for the exposure. This type of financing is usually for large, complex and expensive installations 212 . Project finance may take the form of financing of the construction of a new capital installation, or refinancing of an existing installation, with or without improvements; (b) “Object finance” refers to the method of funding the acquisition of physical assets213 where the repayment of the exposure is dependent on the cash flows generated by the specific assets that have been financed and pledged or assigned to the Reporting Bank; and (c) “Commodities finance” refers to structured short-term lending to finance reserves, inventories, or receivables of exchange-traded commodities214 , where the exposure will be repaid from the proceeds of the sale of the commodity and the obligor has no independent capacity to repay the exposure.
7.3.8 For the purposes of paragraph 7.3.1(h), “subordinated debt” means any liability
or debt instrument that is subordinated to general creditors of the entity, and includes any 211 For example, a Reporting Bank must not use the reported annual revenue figure for the 12 months ending 31 December 2022 for calculating credit risk-weighted exposure amounts after 30 September 2024. 212 For example, power plants, chemical processing plants, mines, transportation infrastructure, environment infrastructure, or media and telecommunications infrastructure. 213 For example, ships, aircraft, satellites, railcars, or fleets. 214 For example, crude oil, metals or crops.

Monetary Authority of Singapore 7-30 liability that meets the definition of “other TLAC liabilities” in paragraphs 6.3.14 and 6.3.15, provided that such liability or debt instrument does not fall within the scope of equity exposures as set out in paragraphs 7.3.9 and 7.3.10.
7.3.9 For the purposes of paragraph 7.3.1(h), “equity exposure” refers to any
exposure that meets all of the following requirements:
(a) the instrument is irredeemable and the return of invested funds can be achieved only by the sale of the investment or sale of the rights to the investment or by the liquidation of the issuer of the instrument; (b) the instrument does not in substance amount to an obligation on the part of the issuer of the instrument; (c) the instrument conveys a residual claim on the assets or income of the issuer of the instrument.
7.3.10 A Reporting Bank must include all of the following as equity exposures:
(a) any direct or indirect ownership interests, whether voting or non-voting, in the assets or income of a bank, corporation, partnership, limited liability partnership, sole proprietorship, trust, fund or any type of business vehicle, where indirect ownership interests include holdings of derivative instruments tied to equity interests and holdings in a bank, corporation, partnership, limited liability partnership, sole proprietorship, trust, fund or any type of business vehicle that issues ownership interests and is engaged principally in the business of investing in equity instruments; (b) any instrument with the same structure as one approved for inclusion as Tier 1 Capital under Part VI or equivalent regulatory requirements of a bank regulatory agency other than the Authority; (c) any instrument that in substance amounts to an obligation on the part of the issuer of the instrument and where one or more of the following conditions are satisfied:
(i) the issuer may defer the settlement of the obligation indefinitely; (ii) the obligation requires, or permits at the discretion of the issuer, settlement by issuance of a fixed number of the equity shares of the issuer; (iii) the obligation requires, or permits at the discretion of the issuer, settlement by issuance of a variable number of the equity shares of the issuer and ceteris paribus, any change in the value of the obligation is attributable to, comparable to, and in the same direction

Monetary Authority of Singapore 7-31 as, the change in the value of a fixed number of the equity shares of the issuer215; (iv) the instrument is an instrument where the holder has the option to require that the obligation be settled in equity shares, but does not include any of the following instruments:
(A) a traded instrument where the Reporting Bank is able to demonstrate to the satisfaction of the Authority that the instrument is traded more like the debt of the issuer than its equity; (B) a non-traded instrument where the Reporting Bank is able to demonstrate to the satisfaction of the Authority that the instrument should be treated as a debt exposure; (d) any instrument, including any debt, security, partnership, derivative or vehicle, structured with the intent of conveying the economic substance of an ownership interest exposure as defined in sub-paragraph (a). This includes – (i) any debt instrument which is convertible into equity at the option of the issuer or automatically by the terms of the instruments; (ii) any equity that is recorded as a loan, arising from a debt to equity swap made as part of the orderly realisation or restructuring of the debt, where such instrument does not attract a lower regulatory capital requirement than would apply if the holding remained in the debt portfolio; and (iii) any instrument with a return linked to that of equities, unless it is directly hedged by another equity exposure and the net position does not involve material risk; (e) any perpetual instrument which is irredeemable or redeemable at the issuer’s option, including any irredeemable perpetual preference shares or perpetual preference shares redeemable at the issuer’s option; (f) any debt holding where the Authority has, on a case-by-case basis, required the Reporting Bank to recharacterise as an equity exposure for the purposes of calculating regulatory capital requirements. 215 For certain obligations that require or permit settlement by issuance of a variable number of the issuer’s equity shares, the change in the monetary value of the obligation is equal to the change in the fair value of a fixed number of equity shares multiplied by a specified factor. Those obligations meet the conditions of paragraph 7.3.10(c)(iii) if both the factor and the referenced number of shares are fixed. For example, an issuer may be required to settle an obligation by issuing shares with a value equal to 3 times the appreciation in the fair value of 1,000 equity shares. That obligation is considered to be the same as an obligation that requires settlement by issuance of shares equal to the appreciation in the fair value of 3,000 equity shares.

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7.3.11 For the purposes of paragraph 7.3.10(d)(iii), a Reporting Bank must, if required
by the Authority, be able to demonstrate that the net position of hedged equity exposures does not involve material risk.
7.3.12 For the purposes of paragraph 7.3.10(d), the Reporting Bank must not include
any instrument structured with the intent of conveying the economic substance of a debt holding or securitisation exposure. 216
7.3.13 For the purposes of paragraph 7.3.10(c)(iv)(A) and (B), subject to approval by
the Authority, a Reporting Bank may break down the risks associated with the instrument into an equity exposure and a debt exposure for the purposes of calculating regulatory capital requirements under the Notice. The Reporting Bank must, if required by the Authority, be able to demonstrate how it breaks down the risks into an equity exposure and a debt exposure.
7.3.14 For the purposes of paragraph 7.3.1(h), “regulatory capital instrument” refers
to an instrument which is included in the regulatory capital of a financial institution that is subject to minimum prudential standards by a financial regulatory agency.
7.3.15 For the purposes of paragraph 7.3.1(i), in the case of an exposure to a small
business, a Reporting Bank must ensure that the exposure also qualifies as a retail small business exposure in accordance with the internal written policies of the Reporting Bank.
7.3.16 For the purposes of determining the total exposure to any obligor or group of
obligors in paragraph 7.3.1(i)(iii) and (iv), the Reporting Bank must ensure that the total exposure is gross of any CRM and comprises all exposures to that obligor or group of obligors under paragraph 7.3.1(i) and (j). For off-balance sheet exposures, the Reporting Bank must ensure the exposure is gross of any CRM and calculated after applying the relevant CCFs. In addition, the Reporting Bank must ensure that the basis of aggregation, is the same basis on which the Reporting Bank treats an obligor in a group of obligors for its risk management purposes, and must include exposures to related corporations of the obligor and exposures to the sole proprietors or partners in any of the entities in the group of obligors. However, the Reporting Bank may disaggregate its exposures to an obligor in a group of obligors if it has assessed that the disaggregated obligor has sufficient financial resources to fully service the obligor’s liabilities and does not need to depend on any other entity within the group of obligors for financial assistance in meeting the liabilities. A Reporting Bank must not disaggregate based on product type alone.
7.3.17 For the purposes of paragraph 7.3.1(k)(ii), a Reporting Bank must categorise
an SA(CR) exposure in the real estate asset class, under the regulatory real estate asset sub-class, if all of the following conditions are met:
(a) the exposure is –
(i) secured by a fully completed real estate; (ii) to an individual and secured by RRE under construction or land upon which RRE would be constructed in Singapore, where the RRE is – 216 For example, a Reporting Bank must treat perpetual preference shares redeemable at the holder’s option and non-convertible term preference shares as debt exposures.

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(A) an HDB flat, Design, Build and Sell Scheme (DBSS) flat, or Executive Condominium (EC); (B) RRE constructed by a licensed housing developer as defined in
section 2 of the Housing Developers (Control & Licensing) Act
1965, and licensed under Part II of the Housing Developers (Control & Licensing) Act 1965; or (C) RRE that will be the primary residence of the obligor, with 4 or fewer units, and is not, in effect, indirectly financing ADC; or (iii) to an individual and secured by RRE under construction or land upon which RRE would be constructed in a foreign country or jurisdiction and all of the following conditions are met:
(A) the bank regulatory agency in the foreign country or jurisdiction allows the SA(CR) exposure in the real estate asset class to an individual and secured by RRE under construction or land upon which RRE would be constructed in the foreign country or jurisdiction to be subject to the same capital treatment as an exposure secured by a fully completed real estate; (B) the Reporting Bank has assessed and ascertained that – (I) the sovereign or a PSE in the foreign country or jurisdiction has the legal powers and ability to ensure that the RRE under construction will be completed; or (II) the SA(CR) exposure in the real estate asset class meets the condition in sub-paragraph (a)(ii)(C); (C) the Reporting Bank has informed the Authority in writing of the assessment in sub-paragraph (a)(iii)(B), prior to categorising the exposure in the regulatory real estate asset sub-class, unless the Authority has directed that the Reporting Bank must seek prior approval for any such categorisations. To avoid doubt, the Authority may disallow the categorisation if the Authority is not satisfied with the assessment in sub-paragraph (a)(iii)(B); (b) the Reporting Bank must obtain a written independent legal opinion217 , which concludes that any claim on the real estate securing the exposures is binding on all relevant parties and legally enforceable in all relevant countries or jurisdictions, including the country or jurisdiction whose law governs the collateral agreement and the country or jurisdiction whose law governs the transaction in relation to the collateral agreement; 217 While a Reporting Bank may use either an in-house or external legal counsel for the purposes of obtaining a written independent legal opinion, it should consider whether or not an in-house counsel opinion is appropriate. In the case of an in-house legal counsel, a Reporting Bank should ensure that the in-house legal counsel is independent of the parties originating the exposure.

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(c) the collateral agreement mentioned in sub-paragraph (b) and the legal process underpinning it provides for the Reporting Bank to realise the value of the property within a reasonable time frame; (d) the Reporting Bank holds – (i) a first charge over the real estate; (ii) a junior charge over the real estate where all the senior charges ranking above the junior charge in question are held by one or more of the following persons:
(A) the Reporting Bank;
(B) CPF;
(C) HDB;
(D) JTC; or
[MAS Notice 637 (Amendment) 2024]
(iii) a junior charge over the real estate where another person or persons hold any senior charges, or a junior charge and senior charge over the real estate, with another person or persons holding an intermediate charge, where the junior charge provides the Reporting Bank a claim for the real estate that is legally enforceable and constitutes an effective mitigant for credit risk, and all of the following conditions are met:
(A) the Reporting Bank is able to initiate the sale of the real estate independently from other persons holding a charge over the real estate; (B) in cases where the real estate is not sold by means of a public auction, persons holding the senior charge over the real estate are required to take reasonable steps to obtain a fair market value or the best price that may be obtained in the circumstances when exercising any power of sale on their own; (C) for the purposes of sub-paragraph (d)(iii)(B), persons holding the senior charge to the real estate are not allowed to sell the real estate on their own at a discounted value in detriment of the junior charge; (e) the obligor must meet the criteria set out in the Reporting Bank’s underwriting policies for granting exposures secured by real estate, including the assessment of the ability of the obligor to repay; (f) the Reporting Bank must ensure that its underwriting policies –

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(i) define relevant metrics, including the debt service coverage ratio, and specify the corresponding relevant levels for the Reporting Bank’s assessments;218 and (ii) define additional relevant metrics, including occupancy rate of the real estate, where the repayment of the exposure depends materially on the cash flows generated by the real estate; (g) the Reporting Bank must calculate the LTV of the exposure as the amount of the loan divided by the value of the real estate, in accordance with all of the following:
(i) the value of the real estate must be based on a valuation that satisfies all of the following conditions:
(A) the valuation is appraised independently from the Reporting Bank’s mortgage acquisition, loan processing and loan decision process; (B) the valuation criteria is prudently conservative, and excludes expectations on price increases and reflects the value that is sustainable over the life of the exposure, taking into account the potential for the current market price to be significantly above this value; (C) the valuation is not higher than the market value of the real estate where the market value can be determined or the effective purchase price of the real estate where the exposure is financing the purchase of the real estate; (ii) the value of the real estate must be maintained at the valuation referred to in sub-paragraph (g)(i) measured at origination of the exposure, subject to all of the following:
(A) where the value of the real estate has declined since origination, including where there is an impairment to the value of the real estate, the Reporting Bank must apply the lower value; (B) the Reporting Bank may make a upward adjustment to the value of the real estate, subsequent to an adjustment in subparagraph (g)(ii)(A), in accordance with an increase in the value of the real estate, provided that the value of the real estate does not exceed the valuation measured at origination; (C) where the value of the real estate has unequivocally increased due to modifications made to the real estate, based on a subsequent formal valuation of the real estate by an 218 The Reporting Bank should refer to Notice 645 on “Computations of Total Debt Servicing Ratio for Property Loans” and Notice 632 on “Residential Property Loans” published by the Authority and “Principles for sound residential mortgage underwriting practices” (April 2012) issued by the FSB for the setting of the appropriate metrics and levels.

Monetary Authority of Singapore 7-36 independent accredited valuer, the Reporting Bank may apply the higher value; (iii) the amount of loan must include the outstanding amount and any undrawn committed amount of the exposure, and be calculated gross of any specific or general allowances and before the application of CRM, subject to all of the following:
(A) a Reporting Bank may net pledged deposits from the amount of the loan in accordance with paragraphs 7.2.9 and 7.2.10 where the loans and deposits are covered by a qualifying on-balance sheet netting agreement, and the deposits are pledged unconditionally and irrevocably for the sole purpose of redemption of the exposure; (B) in the case where a Reporting Bank has different exposures secured by the same real estate and the charges for these exposures are sequential in ranking order i.e. no intermediate charge from another person, the Reporting Bank must treat the different exposures as a single exposure for risk-weighting purposes and calculate the amount of the loan for the LTV computation by aggregating the amount of the loans of the different exposures; (C) in the case where the Reporting Bank holds a junior charge over the real estate and another person or persons hold any senior charges pursuant to sub-paragraphs (d)(ii) and (d)(iii), the Reporting Bank must calculate the amount of loan for the LTV computation for the exposure secured by the junior charge in question as the aggregate of the amount of loan of the exposure secured by the junior charge in question and the amount of loans secured by other charges of equal or higher ranking than the junior charge in question, including senior charges held by one or more of the persons listed under sub-paragraph (d)(ii); [MAS Notice 637 (Amendment) 2024] (h) the value of the real estate must not depend materially on the performance of the obligor; (i) the Reporting Bank must ensure that all the information required at the origination of the exposure and for monitoring purposes is properly documented, including information on the ability of the obligor to repay in sub-paragraph (e) and on the valuation of the property in sub-paragraph (g).
7.3.18 For the purposes of the condition in paragraph 7.3.17(a)(i), the Reporting Bank
must treat forest and agricultural land as fully completed.
7.3.19 For the purposes of paragraph 7.3.17(a)(ii)(C), the Reporting Bank must assess
whether the RRE is the primary residence of the obligor at the inception of the exposure

Monetary Authority of Singapore 7-37 and update the assessment when the Reporting Bank becomes aware of any relevant information.
7.3.20 For the purposes of paragraph 7.3.17(a)(ii) and (iii), a Reporting Bank may
treat an exposure to an entity other than an individual, as an exposure to the individual, if the Reporting Bank meets all the following conditions:
(a) the Reporting Bank has robust processes to ascertain that the exposure is structured to replicate the risk profile of an exposure to an individual; (b) the Reporting Bank is able to identify and manage the legal risks that arise in such structures; (c) the Reporting Bank ensures that the exposure is covered by a personal guarantee which is – (i) provided by an individual who ultimately owns or controls the entity or an individual on whose behalf the exposure is established; and (ii) meets the requirements in paragraph 4.1 of Annex 7H; (d) the Reporting Bank is able to demonstrate to the satisfaction of the Authority that the conditions in sub-paragraphs (a), (b) and (c) are met, when requested to do so by the Authority.
7.3.21 For the purposes of the valuation referred to in paragraph 7.3.17(g)(i), a
Reporting Bank must obtain a formal valuation by an independent accredited valuer at origination. For the purposes of paragraph 7.3.17(g), a Reporting Bank must assess the value of the real estate at least on an annual basis. The Reporting Bank must have in place policies addressing matters in relation to the value of the real estate in paragraph 7.3.17(g)(i) and (ii), including the frequency of revaluation, the procedures for revaluation under various market circumstances, and the revaluation methods and approaches to be used in each circumstance which may include statistical methods219 or a formal revaluation by an independent accredited valuer.220 A Reporting Bank must obtain a formal revaluation by an independent accredited valuer on the valuation of the real estate if the Reporting Bank assesses that the value of the real estate may have declined materially relative to general market prices or when a credit event221 occurs.
7.3.22 For the purposes of paragraph 7.3.17(g)(iii)(C), if there is insufficient
information to ascertain the ranking of the other charges, the Reporting Bank must assume that the other charges rank pari passu with the junior charge held by the Reporting Bank. 219 For example, reference to property indices or sampling. 220 A Reporting Bank should regularly backtest and benchmark statistical methods, where possible, so that the results obtained are robust. A Reporting Bank may also use statistical methods to identify real estate that may have declined in value and that may need revaluation. In general, a Reporting Bank should undertake a formal revaluation regularly. 221 For example, default.

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Sub-division 2: Credit Quality Grades and External Credit Assessments
7.3.23 A Reporting Bank must assign an SA(CR) exposure to a credit quality grade
based on the external credit assessment that is applicable to the SA(CR) exposure in accordance with Tables 7M-1 and 7M-2, as the case may be.
7.3.24 A Reporting Bank must only use external credit assessments by recognised
ECAIs. The Authority may impose conditions on the use of such external credit assessments.
7.3.25 A Reporting Bank must not consider an SA(CR) exposure as being rated from
the perspective of the Reporting Bank unless the exposure has an external credit assessment by a recognised ECAI and the Reporting Bank has notified the Authority of its nomination to use the external credit assessments of that recognised ECAI for regulatory capital purposes. In other words, if an external credit assessment by an ECAI exists but – (a) the ECAI is not a recognised ECAI; or (b) the ECAI is a recognised ECAI that has not been nominated by the Reporting Bank, the Reporting Bank must consider the exposure as being unrated from the perspective of the Reporting Bank.
7.3.26 Subject to paragraph 7.3.27, a Reporting Bank must perform due diligence to –
(a) ensure that the Reporting Bank has an adequate understanding, at origination and thereafter on a regular basis at least annually, of the risk profile and characteristics of its counterparties; and (b) in cases where external credit assessments are used, assess the risk of the exposure for risk management purposes and whether the risk weight applied is appropriate and prudent.222
7.3.27 A Reporting Bank must assess the operating and financial performance levels
and trends, through internal credit analysis or other analytics outsourced to a third party, for each counterparty. A Reporting Bank must be able to access information about its counterparties on a regular basis to complete due diligence analyses.223 A Reporting Bank must be able to demonstrate to the Authority that its due diligence analyses are appropriate.224
7.3.28 Paragraphs 7.3.26 and 7.3.27 do not apply to SA(CR) exposures in the central
government and central bank asset class, and PSE asset class.
222 The sophistication of the due diligence should be appropriate to the size and complexity of the Reporting Bank’s activities. 223 For SA(CR) exposures to entities belonging to consolidated groups, a Reporting Bank should perform due diligence, to the extent possible, at the legal entity level to which there is a SA(CR) exposure. In evaluating the repayment capacity of the legal entity, a Reporting Bank should take into account the support of the group and the potential for it to be adversely impacted by problems in the group. 224 A Reporting Bank should have in place effective internal policies, processes, systems and controls to ensure that the appropriate risk weights are assigned to counterparties.

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7.3.29 A Reporting Bank must use its nominated recognised ECAIs and their external
credit assessments consistently for each type of exposure, for both risk-weighting and risk management purposes. A Reporting Bank must not cherry-pick the assessments provided by different recognised ECAIs or arbitrarily change its choice of recognised ECAIs for each type of exposure.
7.3.30 For a particular SA(CR) exposure –
(a) if there is only one external credit assessment by a recognised ECAI that has been nominated by the Reporting Bank, the Reporting Bank must use that assessment to determine the risk weight of the SA(CR) exposure; (b) if there are 2 external credit assessments by recognised ECAIs that have been nominated by the Reporting Bank, and the assessments map into different credit quality grades, the Reporting Bank must assign the SA(CR) exposure to the credit quality grade associated with the higher risk weight; or (c) if there are 3 or more external credit assessments by recognised ECAIs that have been nominated by the Reporting Bank, and the assessments map into different credit quality grades, the Reporting Bank must use only the 2 assessments that correspond to the lowest risk weights, and – (i) if the 2 credit assessments map into the same credit quality grade, the Reporting Bank must use that credit assessment to determine the risk weight of the SA(CR) exposure; and (ii) if the 2 credit assessments map into different credit quality grades, the Reporting Bank must assign the SA(CR) exposure to the credit quality grade associated with the higher risk weight.
7.3.31 A Reporting Bank must not recognise the effects of CRM if such CRM is already
reflected in the issue-specific external credit assessment of the SA(CR) exposure.
7.3.32 Where an SA(CR) exposure has an issue-specific external credit assessment by
a recognised ECAI that has been nominated by the Reporting Bank, a Reporting Bank must use such assessment to determine the risk weight of the SA(CR) exposure. Where an SA(CR) exposure does not have an issue-specific external credit assessment by a recognised ECAI that has been nominated by the Reporting Bank – (a) if there is an issue-specific external credit assessment by a recognised ECAI that has been nominated by the Reporting Bank for another exposure to the same obligor which maps to a risk weight that is lower than that applicable to an unrated exposure, a Reporting Bank may use that issuespecific assessment to risk-weight the SA(CR) exposure only if the SA(CR) exposure ranks pari passu with or is senior to the exposure with the issuespecific assessment in all respects; (b) if the obligor has an issuer external credit assessment by a recognised ECAI that has been nominated by the Reporting Bank which maps to a risk weight that is lower than that applicable to an unrated exposure –

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(i) if the SA(CR) exposure is a senior claim, a Reporting Bank may use the issuer assessment of the obligor to risk-weight the SA(CR) exposure; and (ii) if the SA(CR) exposure is not a senior claim, the Reporting Bank must apply the risk weight that is applicable to an unrated exposure; (c) if there is an issue-specific external credit assessment by a recognised ECAI that has been nominated by the Reporting Bank for another exposure to the same obligor which maps to a risk weight that is equal to or higher than that applicable to an unrated exposure, a Reporting Bank must use that issue-specific assessment to risk-weight the SA(CR) exposure if the SA(CR) exposure ranks pari passu with or is subordinated to the exposure with the issue-specific assessment; (d) if the obligor has an issuer external credit assessment by a recognised ECAI that has been nominated by the Reporting Bank which maps to a risk weight that is equal to or higher than that applicable to an unrated exposure, a Reporting Bank must use the issuer assessment of the obligor to risk-weight the SA(CR) exposure if the SA(CR) exposure ranks pari passu with or is subordinated to the highest unsecured claim on the obligor; (e) if the obligor has an issuer external credit assessment by a recognised ECAI that has been nominated by the Reporting Bank which maps to a risk weight that is lower than that applicable to an unrated exposure, and which only applies to a limited class of liabilities, a Reporting Bank may use the issuer assessment of the obligor only if the exposure falls within that class; or (f) in all other cases, a Reporting Bank must apply the risk weight that is applicable to an unrated exposure.
7.3.33 A Reporting Bank must not use a short-term issue-specific external credit
assessment to derive risk weights for other short-term claims to the same obligor, except where set out in paragraphs 7.3.54, 7.3.55, 7.3.56, 7.3.68, 7.3.69, 7.3.72 and 7.3.73. In all cases, a Reporting Bank must not use a short-term issue-specific external credit assessment to support a risk weight for an unrated long-term claim.
7.3.34 A Reporting Bank must not use external credit assessments for an obligor within
a group to risk-weight other obligors within the same group.
7.3.35 Where an SA(CR) exposure is risk-weighted in accordance with paragraph
7.3.32(a) to (e), a Reporting Bank must use a foreign currency external credit assessment for an SA(CR) exposure denominated in foreign currency. A Reporting Bank may use a domestic currency external credit assessment, if separate, only if – (a) the SA(CR) exposure is denominated in that domestic currency; or (b) the SA(CR) exposure arises through a Reporting Bank’s participation in a loan that has been extended, or is guaranteed against convertibility and transfer risk, by a qualifying MDB, in which case the domestic currency external credit assessment may be used instead of its foreign currency

Monetary Authority of Singapore 7-41 external credit assessment. Where the SA(CR) exposure is guaranteed against convertibility and transfer risk by a qualifying MDB, the domestic currency external credit assessment may be used only for the portion of the SA(CR) exposure that is covered by such a guarantee. For the portion of the SA(CR) exposure that is not covered by such a guarantee, a Reporting Bank must use the foreign currency external credit assessment.
7.3.36 A Reporting Bank may use an external credit assessment to risk-weight an
SA(CR) exposure only if the external credit assessment has taken into account and reflects the entire amount of credit risk exposure the Reporting Bank has with regard to all payments owed to it.225
7.3.37 A Reporting Bank must not use unsolicited external credit assessments to assign
any SA(CR) exposure to a credit quality grade, unless – (a) it has assessed the quality of the unsolicited external credit assessments that it intends to use and is satisfied that these are comparable in performance with solicited external credit assessments and maintains relevant records and documents to be made available to the Authority upon request; and (b) it uses unsolicited external credit assessments consistently for each type of exposures, for both risk-weighting and risk management purposes.
7.3.38 The Authority may exclude the use of unsolicited external credit assessments
by a recognised ECAI for the purposes of calculating regulatory capital requirements if the Authority is not satisfied that the unsolicited assessments are not inferior in quality to the general quality of solicited assessments. In the event the Authority is of the view that an ECAI uses unsolicited external credit assessments to put pressure on entities to obtain solicited external credit assessments, the Authority may refuse to recognise such ECAIs as eligible for capital adequacy purposes. Sub-division 3: Risk Weights
7.3.39 Subject to Sub-division 4 of this Division, a Reporting Bank using the SA(CR)
must226 –
(a) for an SA(CR) exposure that is not defaulted, determine the applicable risk weight in accordance with paragraphs 7.3.40 to 7.3.108; and (b) for an SA(CR) exposure that is defaulted, determine the applicable risk weight in accordance with paragraphs 7.3.109 to 7.3.111. 225 For example, if a Reporting Bank is owed both principal and interest, the Reporting Bank must ensure that the assessment fully takes into account and reflects the credit risk associated with repayment of both principal and interest. 226 This includes an SA(CR) exposure to a lessee equivalent to the discounted lease payment and an SA(CR) exposure to the residual value of the leased assets equivalent to the estimate of the residual value reflected in the balance sheet of the Reporting Bank, as calculated in accordance with paragraph 7.2.7.

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Cash Items
7.3.40 Subject to paragraph 7.3.41, a Reporting Bank must apply a 0% risk weight to
any SA(CR) exposure categorised as a cash item.
7.3.41 A Reporting Bank must apply a 20% risk weight to cash equivalents, including
cheques, drafts and other items drawn on other banks, merchant banks or finance companies that are either payable immediately upon presentation or that are in the process of collection. Central Government and Central Bank Asset Class
7.3.42 Subject to paragraphs 7.3.43 to 7.3.46, a Reporting Bank must risk-weight any
SA(CR) exposure in the central government and central bank asset class in accordance with Table 7-1.
Table 7-1: Risk Weights for the Central Government and Central Bank Asset Class
Credit Quality Grade 1 2 3 4 5 6 Unrated
Risk Weight 0% 20% 50% 100% 100% 150% 100%
7.3.43 A Reporting Bank must apply a 0% risk weight to any SA(CR) exposure to the
Singapore Government or the Authority which is denominated in Singapore dollars and funded by liabilities denominated in Singapore dollars.
7.3.44 For any SA(CR) exposure to any other central government or central bank which
is denominated and funded by liabilities denominated in the local currency of that country or jurisdiction, a Reporting Bank may apply such risk weights as may be specified by the bank regulatory agency of that country or jurisdiction.
7.3.45 To avoid doubt, where applicable, a Reporting Bank may apply the risk weights
specified in paragraphs 7.3.43 and 7.3.44 as the risk weight applicable to the eligible protection provider or eligible financial collateral pursuant to Sub-division 4 of this Division.
7.3.46 A Reporting Bank must apply a 0% risk weight to any SA(CR) exposure to the
Bank for International Settlements, the International Monetary Fund, the European Central Bank, the European Union, the European Stability Mechanism or the European Financial Stability Facility. PSE Asset Class
7.3.47 Subject to paragraph 7.3.48, a Reporting Bank must risk-weight any SA(CR)
exposure in the PSE asset class in accordance with Table 7-2.
Table 7-2: Risk Weights for the PSE Asset Class
Credit Quality Grade 1 2 3 4 5 6 Unrated
Risk Weight 20% 50% 50% 100% 100% 150% 50%
7.3.48 A Reporting Bank must risk-weight any SA(CR) exposure in the PSE asset class
in accordance with Table 7-3 if –

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(a) in the case of a PSE in Singapore, the exposure to the PSE is treated as an exposure to the Singapore Government and the Singapore Government has a credit quality grade of “1” or “2” as set out in Table 7M-1; and (b) in the case of a PSE outside Singapore, the bank regulatory agency of the country or jurisdiction where the PSE is established has exercised the national discretion to treat the exposure to the PSE as an exposure to the central government and the central government of the country or jurisdiction of that PSE has a credit quality grade of “1” or “2” as set out in Table 7M-1.
Table 7-3: Risk Weights for Exposures to PSEs where the Central Government has a Credit
Quality Grade of “1” or “2”
Credit Quality Grade 1 2 3 4 5 6 Unrated
Risk Weight where the Central
Government has a
Credit Quality Grade of “1”
0% 0% 0% 100% 100% 150% 0%
Risk Weight where the Central
Government has a
Credit Quality Grade of “2”
20% 20% 20% 100% 100% 150% 20%
7.3.49 For the purposes of paragraph 7.3.48(a), an exposure to a PSE in Singapore is
treated as an exposure to the Singapore Government only if the exposure is an exposure to a statutory board in Singapore (other than the Authority). MDB Asset Class
7.3.50 Subject to paragraph 7.3.51, a Reporting Bank must risk-weight any SA(CR)
exposure in the MDB asset class in accordance with Table 7-4.
Table 7-4: Risk Weights for the MDB Asset Class
Credit Quality Grade 1 2 3 4 5 6 Unrated
Risk Weight 20% 30% 50% 100% 100% 150% 50%
7.3.51 A Reporting Bank must apply a 0% risk weight to any SA(CR) exposure to a
qualifying MDB.
Bank Asset Class
7.3.52 Subject to paragraphs 7.3.54 to 7.3.57, for any rated SA(CR) exposure in the
bank asset class, a Reporting Bank must apply the risk weight determined in accordance with Table 7-5. Short-term exposures in Table 7-5 refer to either of the following:
(a) exposures with an original maturity of 3 months or less;

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(b) exposures that arise from the movement of goods across national borders with an original maturity of 6 months or less227 .
Table 7-5: Risk Weights for the Bank Asset Class (Rated)
Credit Quality Grade 1 2 3 4 5 6
Risk Weight 20% 30% 50% 100% 100% 150%
Risk Weight for ShortTerm Exposures
20% 20% 20% 50% 50% 150%
7.3.53 For the purposes of risk-weighting under paragraph 7.3.52, a Reporting Bank
may use external credit assessments that incorporate assumptions of implicit government support up to 31 December 2028, unless the Authority requires otherwise. With effect from 1 January 2029, a Reporting Bank must not use external credit assessments that incorporate assumptions of implicit government support, unless the external credit assessments refer to a public bank owned by its government. Where an external credit assessment which does not incorporate assumptions of implicit government support is unavailable, a Reporting Bank must risk-weight the SA(CR) exposure as an exposure that does not have an external credit assessment by a recognised ECAI under paragraph 7.3.58. For the purposes of this paragraph, implicit government support refers to the notion that the government would act to prevent bank creditors from incurring losses in the event of a bank default or bank distress.
7.3.54 A Reporting Bank must risk-weight any short-term SA(CR) exposure228 in the
bank asset class with an issue-specific external credit assessment by a recognised ECAI, in accordance with Table 7-6.
Table 7-6: Risk Weights for Short-Term SA(CR) Exposures in the Bank Asset Class with
Issue-Specific External Credit Assessments
Short-Term Credit
Quality Grade
I II III IV
Risk Weight 20% 50% 100% 150%
7.3.55 If a rated short-term SA(CR) exposure in the bank asset class with an issuespecific external credit assessment –
(a) attracts a risk weight of 50% or 100%, then the Reporting Bank must apply a risk weight of not lower than 100% to any unrated short-term SA(CR) exposure to the same entity; or (b) attracts a risk weight of 150%, then the Reporting Bank must apply a risk weight of 150% to any unrated SA(CR) exposure (whether long-term or short-term) to the same entity, unless the Reporting Bank uses recognised CRM for such exposure.
7.3.56 A Reporting Bank must comply with all of the following requirements when
determining whether to apply the general preferential treatment for short-term exposures 227 This may include on-balance sheet exposures such as loans and off-balance sheet exposures such as selfliquidating trade-related contingent items. 228 An example of a short term SA(CR) exposure is a particular issuance of commercial paper.

Monetary Authority of Singapore 7-45 in the bank asset class as described in paragraph 7.3.52, or the treatment for issue-specific short-term external credit assessments as set out in paragraph 7.3.54:
(a) the Reporting Bank must apply the general preferential treatment for short-term exposures to all exposures in the bank asset class of up to 3 months original maturity when there is no issue-specific short-term external credit assessment for any short-term exposure to the obligor; (b) if there is an issue-specific short-term external credit assessment for a short-term exposure to the obligor which maps to a risk weight that is lower or identical to that derived from the general preferential treatment, the Reporting Bank must use the issue-specific short-term external credit assessment for only that specific short-term exposure and apply the general preferential treatment to other short-term exposures to the same obligor; (c) if there is an issue-specific short-term external credit assessment for a short-term exposure to the obligor which maps to a higher risk weight than that derived from the general preferential treatment, the Reporting Bank must not use the general short-term preferential treatment. The Reporting Bank must ensure that all unrated short-term exposures receive the same risk-weighting as that implied by the issue-specific short-term external credit assessment.
7.3.57 A Reporting Bank must perform due diligence to ensure that any external credit
assessment by a recognised ECAI appropriately and conservatively reflects the creditworthiness of the SA(CR) exposure in the bank asset class. If the due diligence analysis reflects higher risk characteristics than that implied by the credit quality grade of the exposure, the Reporting Bank must assign a risk weight corresponding to at least one credit quality grade higher than that determined in accordance with Table 7-5 or
Table 7-6, as the case may be. The Reporting Bank must ensure that the due diligence
analysis does not result in the application of a lower risk weight than that determined in accordance with Table 7-5 or Table 7-6, as the case may be.
7.3.58 Subject to paragraph 7.3.59, for any SA(CR) exposure in the bank asset class
that does not have an external credit assessment by a recognised ECAI, a Reporting Bank must classify the exposure into one of the 3 assessment grades in accordance with paragraph 7.3.60 and apply the risk weight determined in accordance with Table 7-7. Short-term exposures in Table 7-7 refer to either of the following:
(a) exposures with an original maturity of 3 months or less; (b) exposures that arise from the movement of goods across national borders with an original maturity of 6 months or less229 . 229 This may include on-balance sheet exposures such as loans and off-balance sheet exposures such as selfliquidating trade-related contingent items.

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Table 7-7: Risk Weights for the Bank Asset Class (Unrated)
Credit risk assessment grade Grade A Grade B Grade C Risk Weight 40% 75% 150% Risk Weight for Short-Term Exposures 20% 50% 150%
7.3.59 A Reporting Bank may apply a 30% risk weight, instead of a 40% risk weight,
to an SA(CR) exposure in the bank asset class that does not have an external credit assessment by a recognised ECAI and meets the criteria in paragraph 7.3.60(a) for Grade A classification, provided that, based on the latest available information – (a) the counterparty has a Common Equity Tier 1 ratio which meets or exceeds 14%; and (b) the counterparty has a Tier 1 leverage ratio which meets or exceeds 5%.
7.3.60 A Reporting Bank must classify an SA(CR) exposure in the bank asset class that
does not have an external credit assessment by a recognised ECAI into one of the 3 assessment grades, based on the following criteria:
(a) Grade A
(i) Grade A refers to exposures to counterparties with adequate capacity to meet their financial commitments (including repayments of principal and interest) in a timely manner, for the projected life of the assets or exposures, and irrespective of economic cycles and business conditions. (ii) Subject to paragraph 7.3.61, a Reporting Bank must classify a counterparty into Grade A where the counterparty meets or exceeds the published minimum regulatory requirements and buffers established by its national regulatory agency as implemented in the country or jurisdiction where it is incorporated, except for entityspecific minimum regulatory requirements or buffers that may be imposed through supervisory actions and are not made public230 . If such minimum regulatory requirements and buffers (other than entity-specific minimum requirements or buffers) are not publicly disclosed or otherwise made available to the Reporting Bank, the Reporting Bank must classify the counterparty as Grade B or Grade C. For the purposes of this paragraph, published minimum regulatory requirements exclude liquidity standards. (b) Grade B (i) Grade B refers to exposures to counterparties which are subject to substantial credit risk, including exposures for which the counterparty’s repayment capacity is dependent on stable or favourable economic or business conditions. 230 For example, capital add-ons under Pillar 2.

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(ii) A Reporting Bank must classify a counterparty into Grade B where the counterparty meets or exceeds the published minimum regulatory requirements (excluding buffers) established by its national regulatory agency as implemented in the country or jurisdiction where it is incorporated, except for entity-specific minimum regulatory requirements or buffers that may be imposed through supervisory actions and are not made public 231 . If such minimum regulatory requirements are not publicly disclosed or otherwise made available to the Reporting Bank, the Reporting Bank must classify the counterparty as Grade C. For the purposes of this paragraph, published minimum regulatory requirements exclude liquidity standards. (c) Grade C (i) Grade C refers to higher credit risk exposures to counterparties with material default risks and limited margins of safety, and for which adverse business, financial, or economic conditions are very likely to lead, or have led, to an inability to meet their financial commitments. (ii) At a minimum, if any of the following conditions are met, a Reporting Bank must classify the exposure as Grade C:
(A) the counterparty does not meet the published minimum regulatory requirements as set out in sub-paragraph (b)(ii); (B) where in compliance with the legislation governing the preparation of the counterparty’s financial statements, in the country or jurisdiction in which the counterparty is established, the counterparty has prepared audited financial statements and the external auditor has issued an adverse audit opinion or has expressed doubt about the counterparty’s ability to continue as a going concern in its financial statements or audited reports within the previous 12 months. (iii) In all other cases where none of the conditions in sub-paragraph (c)(ii) is met, a Reporting Bank must classify an exposure to a counterparty as Grade C where the Reporting Bank assesses that the counterparty meets the criteria in sub-paragraph (c)(i).
7.3.61 For the purposes of paragraph 7.3.60, if, as part of its due diligence, a Reporting
Bank assesses that the counterparty does not meet the definition of Grade A in paragraph 7.3.60(a), the Reporting Bank must classify the exposure as Grade B, unless it meets the criteria for Grade C in paragraph 7.3.60(c).
7.3.62 Subject to paragraph 7.3.63, for any SA(CR) exposure in the bank asset class
that does not have an external credit assessment by a recognised ECAI, a Reporting Bank must apply the risk weight determined in accordance with Table 7-7 or the risk weight that is applicable to an SA(CR) exposure to the central government of the country or jurisdiction 231 For example, capital add-ons under Pillar 2.

Monetary Authority of Singapore 7-48 in which the counterparty is incorporated, whichever is higher, where all of the following conditions are met:
(a) the SA(CR) exposure is not denominated in the local currency of the country or jurisdiction in which the counterparty is incorporated; (b) if the SA(CR) exposure is booked in a branch of the counterparty which is located in a country or jurisdiction other than the country or jurisdiction in which the counterparty is incorporated, the SA(CR) exposure is not denominated in the local currency of the country or jurisdiction where the branch is located.
7.3.63 Paragraph 7.3.62 does not apply to self-liquidating trade-related contingent
items that arise from the movement of goods with an original maturity of below one year. Covered Bond Asset Class
7.3.64 A Reporting Bank must risk-weight any SA(CR) exposure in the covered bond
asset class that has an issue-specific external credit assessment by a recognised ECAI in accordance with Table 7-8.
Table 7-8: Risk Weights for Exposures in the Covered Bond Asset Class with Issue-Specific
External Credit Assessments
Credit Quality Grade 1 2 3 4 5 6
Risk Weight 10% 20% 20% 50% 50% 100%
7.3.65 A Reporting Bank must risk-weight any SA(CR) exposure in the covered bond
asset class that does not fall within paragraph 7.3.64 in accordance with Table 7-9, based on the risk weight applicable to the bank or mortgage institution issuing the covered bond (whether directly or through an SPV) as determined in accordance with Table 7-5 or
Table 7-7, as the case may be.
Table 7-9: Risk Weights for Exposures in the Covered Bond Asset Class without IssueSpecific External Credit Assessments
Risk weight applicable to the bank or mortgage institution 20% 30% 40% 50% 75% 100% 150% Risk Weight 10% 15% 20% 25% 35% 50% 100%
7.3.66 A Reporting Bank must perform due diligence to ensure that any external credit
assessment by a recognised ECAI appropriately and conservatively reflects the creditworthiness of the covered bond and the issuing bank or mortgage institution. If the due diligence analysis reflects higher risk characteristics than that implied by the credit quality grade of the exposure, the Reporting Bank must assign a risk weight corresponding to at least one credit quality grade higher than that determined in accordance with
Table 7-8 or Table 7-9, as the case may be. A Reporting Bank must ensure that due
diligence analysis does not result in the application of a lower risk weight than that determined in accordance with Table 7-8 or Table 7-9, as the case may be.

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Corporate Asset Class
General Corporate Asset Sub-Class
7.3.67 Subject to paragraphs 7.3.68 and 7.3.69, a Reporting Bank must risk-weight
any SA(CR) exposure in the general corporate asset sub-class in accordance with
Table 7-10.
Table 7-10: Risk Weights for the General Corporate Asset Sub-Class
Credit Quality Grade 1 2 3 4 5 6 Unrated
Risk Weight 20% 50% 75% 100% 150% 150% 100%
7.3.68 A Reporting Bank must risk-weight any short-term SA(CR) exposure in the
general corporate asset sub-class with an issue-specific external credit assessment by a recognised ECAI in accordance with Table 7-11.
Table 7-11: Risk Weights for Short-Term SA(CR) Exposures in the General Corporate Asset
Sub-Class with Issue-Specific External Credit Assessments Short-Term Credit Quality Grade I II III IV Risk Weight 20% 50% 100% 150%
7.3.69 If a short-term SA(CR) exposure in the general corporate asset sub-class with
an issue-specific external credit assessment – (a) attracts a risk weight of 50% or 100%, then the Reporting Bank must apply a risk weight of not lower than 100% to any unrated short-term SA(CR) exposure to the same corporate entity; or (b) attracts a risk weight of 150%, then the Reporting Bank must apply a risk weight of 150% to any unrated SA(CR) exposure (whether long-term or short-term) to the same entity, unless the Reporting Bank recognises CRM for such exposure.
7.3.70 A Reporting Bank must perform due diligence to ensure that any external credit
assessment by a recognised ECAI appropriately and conservatively reflects the creditworthiness of the SA(CR) exposure in the general corporate asset sub-class. If the due diligence analysis reflects higher risk characteristics than that implied by the credit quality grade of the exposure, the Reporting Bank must assign a risk weight corresponding to at least one credit quality grade higher than that determined in accordance with Table 7-10 or Table 7-11, as the case may be. A Reporting Bank must ensure that due diligence analysis does not result in the application of a lower risk weight than that determined in accordance with Table 7-10 or Table 7-11, as the case may be. Corporate SME Asset Sub-Class
7.3.71 Subject to paragraphs 7.3.72 and 7.3.73, a Reporting Bank must risk-weight
any SA(CR) exposure in the corporate SME asset sub-class in accordance with Table 7-12.

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Table 7-12: Risk Weights for the Corporate SME Asset Sub-Class
Credit Quality Grade 1 2 3 4 5 6 Unrated
Risk Weight 20% 50% 75% 100% 150% 150% 85%
7.3.72 A Reporting Bank must risk-weight any short-term SA(CR) exposure in the
corporate SME asset sub-class with an issue-specific external credit assessment by a recognised ECAI in accordance with Table 7-13.
Table 7-13: Risk Weights for Short-Term SA(CR) Exposures in the Corporate SME Asset
Sub-Class with Issue-Specific External Credit Assessments Short-Term Credit Quality Grade I II III IV Risk Weight 20% 50% 100% 150%
7.3.73 If a short-term SA(CR) exposure in the corporate SME asset sub-class with an
issue-specific external credit assessment –
(a) attracts a risk weight of 50% or 100%, then the Reporting Bank must apply a risk weight of not lower than 100% to any unrated short-term SA(CR) exposure to the same entity; or (b) attracts a risk weight of 150%, then the Reporting Bank must apply a risk weight of 150% to any unrated SA(CR) exposure (whether long-term or short-term) to the same entity, unless the Reporting Bank recognises CRM for such exposure.
7.3.74 A Reporting Bank must perform due diligence to ensure that any external credit
assessment by a recognised ECAI appropriately and conservatively reflects the creditworthiness of the SA(CR) exposure in the corporate SME asset sub-class. If the due diligence analysis reflects higher risk characteristics than that implied by the credit quality grade of the exposure, the Reporting Bank must assign a risk weight corresponding to at least one credit quality grade higher than that determined in accordance with Table 7-12 or Table 7-13, as the case may be. A Reporting Bank must ensure that the due diligence analysis does not result in the application of a lower risk weight than that determined in accordance with Table 7-12 or Table 7-13, as the case may be. Specialised Lending Asset Sub-Class
7.3.75 A Reporting Bank must risk-weight any SA(CR) exposure in the specialised
lending asset sub-class that has an issue-specific external credit assessment by a recognised ECAI in accordance with Table 7-14. The Reporting Bank must not use issuer external credit assessments.
Table 7-14: Risk Weights for the Specialised Lending Asset Sub-Class (Rated)
Credit Quality Grade 1 2 3 4 5 6
Risk Weight 20% 50% 75% 100% 150% 150%

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7.3.76 A Reporting Bank must risk-weight any SA(CR) exposure in the specialised
lending asset sub-class that does not have an issue-specific external credit assessment by a recognised ECAI in accordance with Table 7-15.
Table 7-15: Risk Weights for the Specialised Lending Asset Sub-Class (Unrated)
Condition Risk Weight
Where the project finance exposure is in the operational phase as defined in paragraph 7.3.77(a) and is a high quality project finance exposure as defined in paragraph 7.3.77(b) 80% Where the project finance exposure is in the operational phase as defined in paragraph 7.3.77(a), but is not a high quality project finance exposure as defined in paragraph 7.3.77(b) 100% Any other project finance exposure 130% Object finance exposures and commodities finance exposures 100%
7.3.77 For the purposes of determining the risk weight of a project finance exposure
pursuant to paragraph 7.3.76 –
(a) operational phase refers to the phase of a project finance exposure in which the entity that was created specifically to finance or operate physical assets or both has – (i) a positive net cash flow that is sufficient to cover any remaining contractual obligation; and (ii) declining long-term debt; and (b) high quality project finance exposure refers to a project finance exposure in which the entity that was created specifically to finance or operate physical assets or both meets all of the following conditions:
(i) the Reporting Bank assesses that the entity is able to meet its financial commitments in a timely manner and that the entity’s ability to do so is robust against adverse changes in the economic cycle and business conditions; (ii) the entity is restricted from acting to the detriment of the creditors232; (iii) the entity has sufficient reserve funds or other financial arrangements to cover the contingency funding and working capital requirements of the project; (iv) the entity’s revenues are availability-based or subject to a rate-ofreturn regulation or take-or-pay contract; 232 For example, the entity is not able to issue additional debt without the consent of existing creditors.

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(v) the entity’s revenue depends on one main counterparty, where an exposure to the main counterparty – (A) is categorised by the Reporting Bank under, or if the main counterparty were an obligor of the Reporting Bank, would be categorised by the Reporting Bank under – (I) the central government and central bank asset class and is an exposure to a central government; (II) the PSE asset class; or (III) the corporate asset class; and (B) qualifies, or if the main counterparty were an obligor of the Reporting Bank, would have qualified for a risk weight of 80% or lower under paragraphs 7.3.42 to 7.3.44, 7.3.46, 7.3.47 to 7.3.48, Table 7-10, or Table 7-12; (vi) the contractual provisions governing the exposure to the entity provide for a high degree of protection for the Reporting Bank in case of a default of the entity; (vii) the Reporting Bank is protected from the losses resulting from the termination of the project by the main counterparty or at least one counterparty, under contractual provisions governing the exposure to the entity, where an exposure to the counterparty – (A) is categorised by the Reporting Bank under, or if the counterparty were an obligor of the Reporting Bank, would be categorised by the Reporting Bank under – (I) the central government and central bank asset class and is an exposure to a central government; (II) the PSE asset class, or (III) the corporate asset class; and (B) qualifies, or if the counterparty were an obligor of the Reporting Bank, would have qualified for a risk weight of 80% or lower under paragraphs 7.3.42 to 7.3.44, 7.3.46, 7.3.47 to 7.3.48,
Table 7-10, or Table 7-12;
(viii) all assets and contracts necessary to operate the project have been pledged to the Reporting Bank to the extent permitted by applicable law; (ix) the Reporting Bank may assume control of the project finance entity in case of its default.

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7.3.78 For the purposes of paragraph 7.3.77(a)(ii), the Reporting Bank may consider
the entity that was created specifically to finance or operate physical assets or both to have a declining long-term debt if there is an overall decline in the long-term debt between the start date of the project and the point of evaluation. For the purposes of this paragraph, long term debt refers to a debt with original maturity of one year or more.
7.3.79 For the purposes of paragraph 7.3.77(b)(iv), availability-based revenues mean
that –
(a) once construction is completed, the entity is entitled to payments from its contractual counterparties, as long as contract conditions are fulfilled; and (b) the payments referred to in sub-paragraph (a) are – (i) sized to cover operating and maintenance costs, debt service costs and equity returns as the project finance entity operates the project; and (ii) not subject to swings in demand233 , and are adjusted typically only for lack of performance or lack of availability of the asset to the public. Equity and Subordinated Debt Asset Class
7.3.80 Subject to paragraphs 7.3.82 and 7.3.84, a Reporting Bank must risk-weight
any SA(CR) exposure in the equity and subordinated debt asset class as follows:
(a) 400% risk weight to speculative unlisted equity exposures as set out in paragraph 7.3.81; (b) 250% risk weight to all other equity exposures; (c) 150% risk weight to subordinated debt and regulatory capital instruments which are not equities.
7.3.81 Speculative unlisted equity exposures refers to equity investments in unlisted
companies that are –
(a) invested for short-term resale purposes; or (b) venture capital or similar investments234 , and excludes investments in unlisted equities of corporate clients with which the Reporting Bank has or intends to establish a long-term business relationship and debt-equity swaps for corporate restructuring purposes.
7.3.82 A Reporting Bank must apply a risk weight of 1250% to –
233 For example, traffic levels.
234 Venture capital or similar investments are typically investments that are subject to price volatility and are acquired in anticipation of significant future gains.

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(a) all of the following:
(i) the portion of an individual equity exposure held in an unconsolidated major stake company that is not a financial institution, which exceeds 15% of the Reporting Bank’s Eligible Total Capital; (ii) the portion of an individual subordinated debt held in an unconsolidated major stake company that is not a financial institution, which exceeds 15% of the Reporting Bank’s Eligible Total Capital; and (b) the portion of the sum of – (i) the aggregate of the Reporting Bank’s equity exposures held in unconsolidated major stake companies that are not financial institutions; and (ii) the aggregate of the Reporting Bank’s subordinated debt held in unconsolidated major stake companies that are not financial institutions; which exceeds 60% of the Reporting Bank’s Eligible Total Capital.
7.3.83 For the purposes of paragraph 7.3.82(b), a Reporting Bank must –
(a) calculate –
(i) for each individual equity exposure held in an unconsolidated major stake company that is not a financial institution, the portion of the exposure that does not exceed 15% of the Reporting Bank’s Eligible Total Capital; and (ii) for each individual subordinated debt held in an unconsolidated major stake company that is not a financial institution, the portion of the exposure that does not exceed 15% of the Reporting Bank’s Eligible Total Capital; (b) aggregate the amounts calculated in sub-paragraphs (a)(i) and (a)(ii); (c) calculate the portion of the sum of the exposures in paragraph 7.3.82(b)(i) and (ii) which exceeds 60% of the Reporting Bank’s Eligible Total Capital; (d) calculate the ratio of the amount calculated in sub-paragraph (c) to the amount calculated in sub-paragraph (b); and (e) for each individual equity exposure held in an unconsolidated major stake company that is not a financial institution and each individual subordinated debt held in an unconsolidated major stake company that is not a financial institution, apply a risk weight of 1250% on each amount calculated in sub-paragraphs (a)(i) and (a)(ii), multiplied by the ratio calculated in subparagraph (d).

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7.3.84 To avoid doubt, a Reporting Bank must apply the risk weights set out in
paragraph 7.3.80 to an SA(CR) exposure in the equity and subordinated debt asset class that is not subject to a 1250% risk weight under paragraph 7.3.82.
7.3.85 A Reporting Bank must subject the risk weights set out in paragraph 7.3.80(a)
and (b) to a phase-in arrangement from 1 July 2024, as set out in Table 7-16.
Table 7-16: Phase-in of risk weights for equity exposures from 1 July 2024
Risk weight for speculative unlisted equity exposures Risk weight for all other equity exposures From 1 July 2024 160% 130% From 31 December 2025 220% 160% From 31 December 2026 280% 190% From 31 December 2027 340% 220% From 31 December 2028 400% 250% Regulatory Retail Asset Class
7.3.86 A Reporting Bank must risk-weight any SA(CR) exposure in the regulatory retail
asset class in accordance with Table 7-17.
Table 7-17: Risk Weights for the Regulatory Retail Asset Class
Asset Sub-class Risk Weight
Regulatory retail transactor 45%
Regulatory retail non-transactor 75%
Other Retail Asset Class
7.3.87 A Reporting Bank must apply a 100% risk weight to any SA(CR) exposure in
the other retail asset class.
Real Estate Asset Class
ADC Asset Sub-Class
7.3.88 Subject to paragraph 7.3.89, a Reporting Bank must risk-weight any SA(CR)
exposure in the ADC asset sub-class at 150%.
7.3.89 A Reporting Bank may risk-weight any SA(CR) exposure secured by RRE in the
ADC asset sub-class at 100% if the SA(CR) exposure meets all of the following:
(a) prudential underwriting standards in paragraph 7.3.17(f); (b) LTV of the exposure, calculated as the amount of the loan divided by the value of the real estate, is less than or equal to 80%, with the value of the real estate based on a valuation that is calculated in accordance with all of the following:

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(i) the valuation is based on the gross development value of the real estate development and the real estate development is appraised independently from the Reporting Bank’s mortgage acquisition, loan processing and loan decision process; (ii) the valuation criteria is prudently conservative, and excludes expectations on price increases and reflects the value that is sustainable over the life of the exposure, taking into account the potential for the current market price to be significantly above this value; (iii) the valuation is not higher than the market value of the real estate where the market value can be determined.
7.3.90 For the purposes of the valuation referred to in paragraph 7.3.89(b), a
Reporting Bank must obtain a formal valuation by an independent accredited valuer at origination. For the purposes of paragraph 7.3.89(b), a Reporting Bank must assess the value of the real estate at least on an annual basis. The Reporting Bank must have in place policies addressing matters in relation to the value of the real estate in paragraph 7.3.89(b), including the frequency of revaluation, the procedures for revaluation under various market circumstances, and the revaluation methods and approaches to be used in each circumstance which may include statistical methods235 or a formal revaluation by an independent accredited valuer.236 A Reporting Bank must obtain a formal revaluation by an independent accredited valuer on the valuation of the real estate if the Reporting Bank assesses that the value of the real estate may have declined materially relative to general market prices or when a credit event237 occurs. Regulatory Real Estate Asset Sub-Class238
7.3.91 Subject to paragraph 7.3.96, a Reporting Bank must risk-weight any regulatory
RRE exposure which is classified by the Reporting Bank as not materially dependent on cash flows generated by the real estate pursuant to paragraphs 7.3.100 and 7.3.101, in accordance with Table 7-18.
Table 7-18: Risk Weights for regulatory RRE exposures which are not materially dependent
on the cash flows generated by the real estate LTV LTV≤50% 50%<LTV ≤60% 60%<LTV ≤80% 80%<LTV ≤90% 90%<LTV ≤100% LTV>100% Risk Weight 20% 25% 30% 40% 50% 70% 235 For example, reference to property indices or sampling. 236 A Reporting Bank should regularly backtest and benchmark statistical methods, where possible, so that the results obtained are robust. A Reporting Bank may also use statistical methods to identify real estate that may have declined in value and that may need revaluation. In general, a Reporting Bank should undertake a formal revaluation regularly. 237 For example, default. 238 The Authority may from time to time specify a higher risk weight for a particular exposure or group of exposures, taking into account, among other things, the default experience and other factors such as market price stability.

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7.3.92 Subject to paragraph 7.3.96, a Reporting Bank must risk-weight any regulatory
RRE exposure which is classified by the Reporting Bank as materially dependent on cash flows generated by the real estate pursuant to paragraphs 7.3.100 and 7.3.101, in accordance with Table 7-19.
Table 7-19: Risk Weights for regulatory RRE exposures which are materially dependent on
cash flows generated by the real estate
LTV LTV≤50% 50%<LTV
≤60%
60%<LTV
≤80%
80%<LTV
≤90%
90%<LTV
≤100%
LTV>100%
Risk
Weight
30% 35% 45% 60% 75% 105%
7.3.93 Subject to paragraph 7.3.96, a Reporting Bank must risk-weight any regulatory
CRE exposure which is classified by the Reporting Bank as not materially dependent on cash flows generated by the real estate pursuant to paragraph 7.3.100, in accordance with
Table 7-20.
Table 7-20: Risk Weights for regulatory CRE exposures which are not materially dependent
on cash flows generated by the real estate
LTV LTV≤60% LTV>60%
Risk
Weight
Min. (60%, Risk Weight of counterparty)
Risk Weight of counterparty
7.3.94 For the purposes of Table 7-20, the risk weight of the counterparty refers to –
(a) in the case of an exposure to an individual or group of individuals, 75%; (b) in the case of an exposure to a small business, 85%; and (c) in all other cases, the risk weight that is applicable to an unsecured exposure to the obligor.
7.3.95 Subject to paragraph 7.3.96, a Reporting Bank must risk-weight any regulatory
CRE exposure which is classified by the Reporting Bank as materially dependent on cash flows generated by the real estate pursuant to paragraph 7.3.100 in accordance with Table 7-21.
Table 7-21: Risk Weights for regulatory CRE exposures which are materially dependent on
cash flows generated by the real estate
LTV LTV≤60% 60%<LTV≤80% LTV>80%
Risk
Weight
70% 90% 110%
7.3.96 A Reporting Bank must apply a multiplier of 1.25 to the applicable risk weight
of any regulatory real estate exposure against a junior charge, unless the applicable risk weight of the regulatory real estate exposure against a junior charge corresponds to the lowest LTV bucket in Table 7-18, 7-19, 7-20 or 7-21. The Reporting Bank must subject the resulting risk weight after applying the multiplier of 1.25 to a cap based on the applicable risk weight of the regulatory real estate exposure assuming that the exposure is in the other real estate asset sub-class.

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7.3.97 A Reporting Bank which has bought eligible credit protection or has taken
eligible financial collateral for an SA(CR) exposure in the regulatory real estate asset subclass may recognise the effects of CRM. For the purposes of this paragraph, eligible credit protection includes a mortgage insurance which complies with the requirements for recognition of guarantees set out in Annex 7H. 239 For the unprotected portion or uncollateralised portion of the SA(CR) exposure, the Reporting Bank must apply the risk weight based on the LTV bucket prior to the application of the effects of CRM. Other Real Estate Asset Sub-Class
7.3.98 A Reporting Bank must apply the following risk weights to any SA(CR) exposure
in the other real estate asset sub-class, which is classified by the Reporting Bank as not materially dependent on cash flows generated by the real estate pursuant to paragraph 7.3.100:
(a) in the case of an exposure to an individual or group of individuals, 75%; (b) in the case of an exposure to a small business, 85%; (c) in all other cases, the risk weight that is applicable to an unsecured exposure to the obligor.
7.3.99 A Reporting Bank must risk-weight any SA(CR) exposure in the other real estate
asset sub-class which is classified by the Reporting Bank as materially dependent on cash flows generated by the real estate pursuant to paragraph 7.3.100 at 150%. Material Dependence Conditions
7.3.100 A Reporting Bank must classify an SA(CR) exposure in the regulatory real estate
asset sub-class or the other real estate asset sub-class as being materially dependent on cash flows generated by the real estate, if the servicing of the exposure and the prospects for recovery in the event of default materially depend on the cash flows generated by the real estate securing the exposure rather than on the underlying capacity of the obligor to service the exposure from other sources. The primary source of these cash flows would generally be lease or rental payments or the sale of the property.240,241
7.3.101 Despite paragraph 7.3.100, for an SA(CR) exposure in the regulatory real estate
asset sub-class, a Reporting Bank must not classify the following types of exposures as materially dependent on cash flows generated by the real estate:
239 Where mortgage insurance is used by the Reporting Bank, the Reporting Bank should refer to the “Principles for sound residential mortgage underwriting practices” (April 2012) issued by the FSB. 240 It is expected that an exposure which is classified by the Reporting Bank as materially dependent on cash flows generated by the real estate would predominantly apply to an obligor where an unsecured exposure to the obligor is in the corporate asset class or to an SPE, but is not restricted to such exposures. 241 As an example, an exposure may be considered materially dependent on cash flows generated by the real estate if more than 50% of the income from the obligor used in the Reporting Bank’s assessment of the obligor’s ability to service the exposure is from cash flows generated by the real estate securing the exposure.

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(a) an exposure secured by a real estate that is owner-occupied and is the obligor’s primary residence; (b) an exposure, secured by non-owner occupied residential real estate, to an individual who has mortgaged 2 or less non-owner occupied residential real estate units to the Reporting Bank; (c) an exposure secured by RRE to – (i) associations of individuals; or (ii) cooperatives of individuals, where such associations or cooperatives are regulated under national law and exist with the only purpose of granting its members the use of a primary residence in the real estate securing the exposure; (d) an exposure secured by RRE to – (i) public housing companies; or (ii) not-for-profit associations, regulated under national law, that exist to serve social purposes and to offer tenants long-term housing.
7.3.102 For the purposes of assessing material dependence in paragraphs 7.3.100 and
7.3.101, a Reporting Bank must perform the assessment at the time of the inception of the exposure. The Reporting Bank must review the assessment of material dependence, based on the most current and updated information, where available.
7.3.103 To avoid doubt, for the purposes of paragraph 7.3.101(a), a Reporting Bank
must count only up to one owner-occupied residential real estate unit as the obligor’s primary residence. For the purposes of paragraph 7.3.101(b), a Reporting Bank must count any mortgages on other owner-occupied residential real estate units as mortgages on non-owner occupied residential real estate units. Other Exposures Asset Class
7.3.104 A Reporting Bank must risk-weight an exposure referred to in paragraph
6.1.5(p)(iii) at 250%.
7.3.105 A Reporting Bank must risk-weight an exposure referred to in paragraph 6.1.6
at 400% for the purposes of calculating regulatory capital requirements at the Solo level only where the Reporting Bank has obtained the Authority’s approval pursuant to paragraph 6.1.6.
7.3.106 A Reporting Bank must apply a 100% risk weight to any other SA(CR) exposure
in the other exposures asset class.

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Risk weight multiplier to certain exposures denominated in a currency that differs from the income currency
7.3.107 Subject to a maximum risk weight of 150%, a Reporting Bank must apply a
multiplier of 1.5 times to the applicable risk weight of an exposure which fulfils all the following conditions242:
(a) the exposure is an exposure to an individual; (b) the exposure is – (i) an exposure in the regulatory retail asset class that is risk-weighted in accordance with paragraph 7.3.86; (ii) an exposure in the other retail asset class that is risk-weighted in accordance with paragraph 7.3.87; (iii) a regulatory RRE exposure that is risk-weighted in accordance with – (A) paragraph 7.3.91 or 7.3.92; (B) paragraph 7.3.96, where applicable; and (C) paragraph 7.3.97, where applicable; or (iv) an exposure in the other real estate asset sub-class that is riskweighted in accordance with paragraph 7.3.98 or 7.3.99, and is secured by RRE; (c) the exposure is denominated in a currency that differs from the currency of the individual’s source of income243,244; (d) the exposure is an unhedged exposure. 242 A margin facility for which the Reporting Bank has policies and procedures in place to ensure that all of the following are met, need not be considered as an exposure to which the Reporting Bank must apply the multiplier:
(a) the total outstanding loan amount (including any accrued interest) is over-collateralised on an ongoing basis; (b) the collateral comprises predominantly traded financial instruments (including insurance policies which can be surrendered to, or collective investment schemes which can be redeemed with, a financial institution subject to minimum prudential standards and supervision by a financial regulatory agency); (c) the collateral is revalued and remargined daily; (d) the revaluation of collateral referred to in (c) includes the application of haircuts for currency mismatch between the exposure and collateral. 243 Where the Reporting Bank is aware that the individual relies on more than one source of income to pay for the loan instalments, and where one or more of the sources of income is denominated in a currency that differs from the loan currency, the Reporting Bank should consider this condition as fulfilled. 244 Where information on the currency of the individual’s source of income is not readily available and impractical to obtain, the Reporting Bank may use the currency of the individual’s country or jurisdiction of residence as a proxy for determining the currency of the individual’s source of income.

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7.3.108 For the purposes of paragraph 7.3.107, an unhedged exposure means an
exposure to an obligor that does not have natural or financial hedges that cover in aggregate at least 90% of the repayment of the loan instalment against the foreign exchange risk resulting from the mismatch between the currency of the obligor’s income and currency of the exposure. A natural hedge exists where the obligor, in its normal operating procedures, receives foreign currency income that matches the currency of a given exposure245. A financial hedge refers to a legal contract between the obligor and a financial institution to hedge the exposure246 . Defaulted Exposures
7.3.109 Subject to paragraphs 7.3.110 and 7.3.111, a Reporting Bank must risk-weight
the uncollateralised or unprotected portion of any SA(CR) exposure that is a defaulted exposure in accordance with Table 7-22. A defaulted exposure refers to an exposure that is in default in accordance with the definition of default in Annex 7L.
Table 7-22: Risk Weights for Defaulted Exposures
Condition Risk Weight
Where specific allowances are less than 20% of the outstanding amount of the exposure 150% Where specific allowances are no less than 20% of the outstanding amount of the exposure 100%
7.3.110 Subject to paragraph 7.3.111, a Reporting Bank must apply a 100% risk weight
to any regulatory RRE exposure or any SA(CR) exposure in the other real estate asset sub-class which is secured by RRE that is – (a) classified by the Reporting Bank as not materially dependent on cash flows generated by the real estate; and (b) a defaulted exposure.
7.3.111 For the purposes of paragraphs 7.3.109 and 7.3.110 , a Reporting Bank must
calculate the uncollateralised or unprotected portion of any SA(CR) exposure that is a defaulted exposure as follows:
(a) for a Reporting Bank using the FC(SA),
Uncollateralised or unprotected portion = E – P – Cf where – (i) E = E calculated in accordance with Division 2 of this Part; (ii) P = notional amount of eligible credit protection received; and 245 For example, remittances, rental incomes, or salaries. 246 For example, a forward contract with a financial institution.

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(iii) Cf = fair value of eligible financial collateral received; (b) for a Reporting Bank using the FC(CA), Uncollateralised or unprotected portion = E*– P where – (i) E* = E* calculated in accordance with Division 2 of this Part; and (ii) P = notional amount of eligible credit protection received. Sub-division 4: Treatment of Credit Protection and Recognition of Eligible Financial Collateral Treatment of Eligible Credit Protection Bought
7.3.112 A Reporting Bank which has bought eligible credit protection for an SA(CR)
exposure from an eligible protection provider may recognise the effects of CRM of the eligible credit protection, where the risk weight of the eligible protection provider is lower than that of the obligor, as follows:
(a) break down the SA(CR) exposure into –
(i) a protected portion with E equal to the notional amount of the eligible credit protection, subject to any adjustments due to a currency mismatch or a maturity mismatch set out in Annex 7H; and (ii) an unprotected portion with E equal to the E of the SA(CR) exposure less the notional amount of the eligible credit protection adjusted for any currency mismatch or maturity mismatch set out in Annex 7H; (b) for the purposes of calculating the credit risk-weighted exposure amount pursuant to Sub-division 3 or 5 of Division 1 of this Part, use – (i) for the protected portion, the risk weight that is applicable to the eligible protection provider; and (ii) for the unprotected portion, the risk weight that is applicable to the obligor.
7.3.113 Despite paragraph 7.3.112(b), a Reporting Bank must apply a 1250% risk
weight to an SA(CR) exposure below a materiality threshold for which no payment will be made by the protection provider in the event of loss on the SA(CR) exposure as such an exposure is equivalent to a retained first loss position. [MAS Notice 637 (Amendment) 2024]
7.3.114 A Reporting Bank must apply the relevant provisions in Annex 7I for the
purposes of determining the protected portion in cases of proportional cover, principalonly cover, partially eligible credit derivatives, tranched cover and basket credit derivatives.

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Treatment of Credit Protection Sold
7.3.115 A Reporting Bank which has sold unfunded credit protection acquires exposure
to the reference asset. If such exposure is an SA(CR) exposure, the Reporting Bank must calculate the credit risk-weighted exposure amount for the exposure using the risk weight that is applicable to the obligor of the reference asset.
7.3.116 If the unfunded credit protection has more than one reference asset, the credit
risk-weighted exposure amount for the credit protection is the sum of the credit riskweighted exposure amounts in respect of each reference asset calculated using the risk weights that are applicable to the obligors of the respective reference assets.
7.3.117 A Reporting Bank which has sold funded credit protection acquires exposure to
both the reference asset and the protection buyer. If such exposures are SA(CR) exposures, the Reporting Bank must calculate the credit risk-weighted exposure amount for the credit protection as the sum of – (a) the credit risk-weighted exposure amount for the exposure to the reference asset calculated in accordance with paragraphs 7.3.115 and
7.3.116 , as applicable; and
(b) the credit risk-weighted exposure amount for the exposure to the protection buyer, using – (i) E = the carrying amount of the collateral placed with the protection buyer; and (ii) the risk weight that is applicable to the protection buyer.
7.3.118 The capital requirement for the credit protection calculated in accordance with
paragraphs 7.3.116 and 7.3.117 must not exceed the notional amount of the credit protection i.e. the maximum possible payout under the credit protection.
7.3.119 Where a Reporting Bank has provided credit protection (whether funded or
unfunded) through a proportionate structure, i.e. where the maximum possible payout in respect of any particular reference asset is capped at a pre-determined proportion of the notional amount of the credit protection, the Reporting Bank must divide the exposure into individual sub-exposures equal to the proportionate amount of credit protection in respect of each reference asset for the purposes of calculating the credit risk-weighted exposure amount applicable to the credit protection sold.
7.3.120 Where a Reporting Bank has provided credit protection for a basket of reference
exposures through a first-to-default credit derivative, the Reporting Bank must calculate the credit risk-weighted exposure amount applicable to the credit protection sold by aggregating the risk weights that would be assigned to the reference exposures, subject to a cap of 1250%, and multiplying the aggregate with the nominal amount of the protection provided by the credit derivative.
7.3.121 Where a Reporting Bank has provided credit protection for a basket of reference
exposures through a nth-to-default credit derivative, the Reporting Bank must calculate the credit risk-weighted exposure amount applicable to the credit protection sold by applying the treatment referred to in paragraph 7.3.120, except that in aggregating the

Monetary Authority of Singapore 7-64 risk weights, the risk weights assigned to the n-1 assets in the basket of reference exposures with the lowest credit risk-weighted exposure amounts may be excluded. Recognition of Eligible Financial Collateral under FC(SA)
7.3.122 A Reporting Bank which has taken eligible financial collateral must ensure that
the eligible financial collateral is pledged for at least the life of the exposure, and must mark-to-market and revalue the eligible financial collateral at least on a 6-monthly basis, or more frequently if specified by the Authority, to recognise the effects of CRM of the eligible financial collateral under the FC(SA). Subject to paragraph 7.3.124, the Reporting Bank using the FC(SA) may recognise the effects of CRM of the eligible financial collateral as follows:
(a) break down the SA(CR) exposure into –
(i) a collateralised portion with E equal to the latest fair value of the eligible financial collateral; and (ii) an uncollateralised portion with E equal to the E of the SA(CR) exposure less the latest fair value of the eligible financial collateral; (b) for the purposes of calculating the credit risk-weighted exposure amount pursuant to Sub-division 3 or 5 of Division 1 of this Part, use – (i) for the collateralised portion, the risk weight that is applicable to the eligible financial collateral as though the Reporting Bank had a direct exposure to that collateral; and (ii) for the uncollateralised portion, the risk weight that is applicable to the obligor.
7.3.123 For the purposes of paragraph 7.3.122(b)(i), when cash on deposit, certificates
of deposit or other similar instruments issued by the Reporting Bank – (a) are held in a non-custodial arrangement, as collateral at a third-party bank, merchant bank or finance company; and (b) are unconditionally and irrevocably pledged or assigned to the Reporting Bank as the lender, the Reporting Bank must apply the risk weight of the third-party bank, merchant bank or finance company, as the case may be, to the collateralised portion of the exposure covered by such collateral.
7.3.124 If the risk weight determined in accordance with paragraph 7.3.122(b)(i) is less
than 20%, a Reporting Bank must apply a risk weight of 20% to the collateralised portion of the SA(CR) exposure, except in the following cases:
(a) a qualifying repo-style transaction where the counterparty in the transaction is a core market participant, in which case the Reporting Bank may apply a risk weight of 0%;

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(b) a qualifying repo-style transaction where the counterparty in the transaction is not a core market participant, in which case the Reporting Bank may apply a risk weight of 10%; (c) a transaction where there is no currency mismatch and the collateral comprises – (i) cash and certificates of deposit or other instruments similar to certificates of deposit issued by the Reporting Bank, but excluding structured deposits as defined under regulation 2 of the Financial Advisers (Structured Deposits – Prescribed Investment Product and Exemption) Regulations, as set out in paragraph 2.2(a) of Annex 7H; or (ii) exposures in the central government and central bank asset class or in the PSE asset class or a combination thereof qualifying for a 0% risk weight under the SA(CR), and the latest fair value of such collateral has been discounted by 20% for the purposes of determining the value of the collateralised portion of the SA(CR) exposure in accordance with paragraph 7.3.122(a)(i), in which case the Reporting Bank may apply a risk weight of 0%. Treatment of Pools of CRM
7.3.125 A Reporting Bank which is using multiple CRM to cover a single SA(CR)
exposure247 must sub-divide the exposure into portions covered by each type of CRM248 and calculate the credit risk-weighted exposure amount of each portion separately by applying paragraphs 7.3.112, 7.3.113, 7.3.114, 7.3.122 and 7.3.124, whichever is applicable. A Reporting Bank must apply the same approach when recognising eligible credit protection by a single eligible protection provider with differing maturities. Sub-division 5: Recognised ECAIs Recognition of an ECAI
7.3.126 The Authority may recognise an ECAI if the Authority –
(a) is satisfied that the ECAI meets the recognition criteria set out in paragraphs 7.3.130 to 7.3.138249, including for short-term external credit assessments where short-term external credit assessments are to be used; and 247 For example, the Reporting Bank has both eligible financial collateral and eligible credit protection partially covering the exposure. 248 For example, a portion covered by eligible financial collateral and a portion covered by eligible credit protection. 249 For this purpose, the Authority will consider, among others, the ECAI’s adherence to the “Code of Conduct Fundamentals for Credit Rating Agencies” issued by IOSCO (revised March 2015 and available at www.iosco.org/library/pubdocs/pdf/IOSCOPD482.pdf).

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(b) has received a letter of support from a Reporting Bank stating that it intends to use the external credit assessments of that ECAI for the purposes of calculating regulatory capital requirements pursuant to this Notice250 .
7.3.127 The recognition of an ECAI by the Authority is for the sole purpose of calculating
regulatory capital requirements by a Reporting Bank pursuant to this Notice, and must not be taken as regulation of the ECAI or licensing or approval of the ECAI to do business in Singapore.
7.3.128 The Authority may revoke its recognition of an ECAI if the ECAI no longer meets
the criteria set out in paragraphs 7.3.130 to 7.3.138.
7.3.129 The list of recognised ECAIs is set out at Annex 7N.
Recognition Criteria
7.3.130 Objectivity: The methodology for assigning credit assessments of a recognised
ECAI must be rigorous, systematic, and subject to validation based on historical experience. Credit assessments must be subject to ongoing review and responsive to changes in financial condition of the entity assessed. An assessment methodology for each market segment, including rigorous backtesting, must have been established for at least one year, and preferably at least 3 years. In this regard – (a) the ECAI must document and have procedures in place to ensure that its assessment methodologies are applied consistently in the formulation of all credit assessments in a given asset class, industry sector or region251; (b) the ECAI must establish a credit assessment committee with formalised terms of reference to approve credit assessments that have been recommended by credit assessment analysts. The ECAI must also have an independent internal audit function (or a function that plays a similar role and carries out similar tasks) to assess the compliance of the ECAI with its internal policies and procedures; (c) the assessment methodologies of the ECAI must incorporate factors that are relevant in determining an entity’s creditworthiness. To the extent possible, the ECAI must be able to demonstrate that its assessment methodologies have produced accurate credit assessments in the past; (d) the assessment methodologies of the ECAI must be based on both qualitative and quantitative approaches; (e) the assessment methodologies of the ECAI are subject to robust and quantitative backtesting based on at least one year of historical data, and 250 The Reporting Bank should perform an appropriate level of due diligence on the ECAI before submitting such a letter of support. 251 “Asset class” refers to categories such as loans, asset-backed securities, collateralised debt obligations, etc., “industry sector” refers to categories such as utilities, financial institutions, telecommunications, etc., and “region” refers to categories such as emerging markets, Asia ex-Japan, Europe, etc.

Monetary Authority of Singapore 7-67 preferably 3 years. Other statistical studies 252 must be carried out periodically by the ECAI to validate its assessment methodologies over time and across different asset classes. Any systematic assessment errors identified through backtesting and other statistical reviews must be incorporated in the assessment methodologies; and (f) the ECAI must have procedures that are written and implemented to ensure that its credit assessments are reviewed and updated at least annually or upon the occurrence of material events.
7.3.131 Independence: A recognised ECAI must not be subject to economic, political
and any other pressures that may influence its credit assessments. In particular, an ECAI must not delay or refrain from taking a rating action based on its potential effect (economic, political or otherwise).253 In this regard – (a) the ECAI must have in place and implement adequate processes and safeguards to ensure that its ownership structure and board composition do not prejudice the objectivity of its credit assessments; (b) the ECAI must not conduct any business transactions with any of the entities it assesses that could undermine the objectivity of its credit assessments; (c) the ECAI must be able to demonstrate that its businesses, other than those incidental or synergistic to the issuance of credit assessments, are operationally separated from its credit assessment business; (d) the ECAI must be able to demonstrate that its financial viability is not dependent on revenue generated from a few key customers; (e) the ECAI must provide adequate disclosure of its pricing policy and any fee charged must not be dependent on the credit assessment issued; and (f) employees of the ECAI must not be in an executive position in any of the entities assessed by the ECAI and must not be compensated in a way that could lead a compromise in the objectivity of the credit assessments.
7.3.132 International Access and Transparency: The individual credit assessments of a
recognised ECAI, the key elements underlying the assessments and whether the issuer participated in the assessment process must be publicly available on a non-selective basis, unless they are private assessments 254 . In addition, the general procedures, methodologies and assumptions for arriving at assessments used by a recognised ECAI must be publicly disclosed. 252 Examples are transition and default matrices. 253 The credit assessment process should be as free as possible from any constraints which could arise in situations where the composition of the board of directors or the shareholder structure of the ECAI may be seen as creating a conflict of interest. Furthermore, an ECAI should separate operationally, legally and, if practicable, physically, its credit assessment business from other businesses and analysts. 254 Private assessments should be at least available to both domestic and foreign institutions with legitimate interest and on equivalent terms.

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7.3.133 Disclosure: A recognised ECAI must disclose its code of conduct, its
compensation arrangements255
, any conflict of interest, its assessment methodologies (including the definition of default, the time horizon, and the meaning of each credit assessment), the actual default rates experienced in each credit assessment category, and the transitions of the assessments.256 In this regard – (a) the ECAI must make public the principles of its assessment methodologies; (b) the ECAI must publicly disclose in a timely manner, any material changes made to its assessment methodologies or any significant event that could affect its performance on any of the criteria set out in paragraphs 7.3.130 to 7.3.138; (c) the ECAI must publicly disclose information regarding the meaning of each credit assessment category, actual default rates, transition matrices, definition of default and the time horizon for which a default is considered; and (d) the ECAI must publicly disclose whether a credit assessment was solicited or unsolicited. For the latter, the ECAI must make public its definition of an unsolicited credit assessment.
7.3.134 Without prejudice to the generality of paragraph 7.3.133, the following
situations and their influence on the ECAI’s credit assessment methodologies or credit assessment actions must be disclosed as conflicts of interest mentioned under paragraph 7.3.133:
(a) the ECAI is being paid to issue a credit assessment by the assessed entity or by the obligor, originator, underwriter, or arranger of the assessed obligation; (b) the ECAI is being paid by subscribers with a financial interest that could be affected by a credit assessment action of the ECAI; (c) the ECAI is being paid by assessed entities, obligors, originators, underwriters, arrangers, or subscribers for services other than issuing credit assessment or providing access to the ECAI’s credit assessments; 255 Regarding the disclosure of an ECAI's compensation arrangements – (a) the ECAI should disclose the general nature of its compensation arrangements with assessed entities, obligors, lead underwriters, and arrangers; (b) when the ECAI receives from an assessed entity, obligor, originator, lead underwriter, or arranger compensation unrelated to its credit assessment services, the ECAI should disclose such unrelated compensation as a percentage of total annual compensation received from such assessed entity, obligor, lead underwriter, or arranger in the relevant credit assessment report or elsewhere, as appropriate; and (c) the ECAI should disclose in the relevant credit assessment report or elsewhere, as appropriate, if it receives 10% or more of its annual revenue in aggregate from a single client (e.g. an assessed entity, obligor, originator, lead underwriter, arranger, or subscriber), related corporations and associates of the single client, and entities which the single client is an associate of. 256 For example, a recognised ECAI should disclose the likelihood of “AA” external credit assessments becoming “A” over time. The recognised ECAI should disclose a credit assessment as soon as practicably possible after issuance. When disclosing a credit assessment, the ECAI should provide the information in plain language, indicating the nature and limitation of credit assessment and the risk of unduly relying on it to make investments.

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(d) the ECAI is providing a preliminary indication or similar indication of credit quality to an entity, obligor, originator, underwriter, or arranger prior to being hired, to determine the final credit assessment for the entity, obligor, originator, underwriter, or arranger; (e) the ECAI has a direct or indirect ownership interest in an assessed entity, or obligor, or an assessed entity or obligor has a direct or indirect ownership interest in the ECAI.
7.3.135 Resources: A recognised ECAI must have sufficient resources to carry out credit
assessments properly. These resources must allow for substantial ongoing contact with senior and operational levels within the entities assessed in order to add value to the credit assessments. A recognised ECAI must assign analysts with appropriate knowledge and experience to assess the creditworthiness of the type of entity or obligation being assessed. In this regard – (a) credit assessments must be made by a credit assessment committee composed of adequately qualified and experienced individuals, in accordance with the established criteria and methodology of the ECAI; (b) the ECAI must possess a sufficient number of staff members with the requisite level of analytical skills and professional experience necessary for them to perform credit assessments competently; (c) the ECAI must be financially sound and have enough resources to invest in the necessary infrastructure required for the efficient processing of data and timely release of reliable credit assessments; and (d) the ECAI must establish recruitment and training policies for each level of analysts under its employment.
7.3.136 Credibility: To some extent, credibility is derived from the criteria above. In
addition, the reliance on an ECAI’s external credit assessments by independent parties257

would be evidence of the credibility of the assessments of the ECAI. The credibility of an ECAI is also underpinned by the existence of internal procedures to prevent the misuse of confidential information. In order to be eligible for recognition, an ECAI does not have to assess firms in more than one country or jurisdiction. Considerations assessed by the Authority to determine if the ECAI satisfies this criterion include – (a) the financial viability and market share of the ECAI, especially in the market for which the ECAI is operating and is to be recognised; (b) the level of market acceptance and reliance on the credit assessments of the ECAI; (c) statistical data that demonstrates market reliance on the credit assessments of the ECAI258; and 257 For example, investors, insurers, trading partners. 258 For example, market movements in response to changes in credit assessments.

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(d) the presence of internal procedures to detect misuse or unauthorised disclosure or leakage of confidential information.
7.3.137 No abuse of unsolicited external credit assessments: A recognised ECAI must
not use unsolicited external credit assessments to put pressure on entities to obtain external credit assessments.
7.3.138 Cooperation with the Authority: A recognised ECAI must provide access to the
Authority to external credit assessments, significant changes to methodologies and other relevant data in order to support initial and continued determination of eligibility. Mapping Process
7.3.139 The Authority shall map the external credit assessments of a recognised ECAI
to the credit quality grades set out in Annex 7M, taking into account the qualitative factors set out in paragraph 7.3.140 and the guidelines for supervisors set out in “Standardised approach – implementing the mapping process (April 2019)” published by BCBS.
7.3.140 The qualitative factors considered by the Authority for the mapping process
include –
(a) the size and scope of the pool of issuers covered by the ECAI; (b) the range of credit assessments assigned by the ECAI; (c) the definition of each credit assessment category; (d) the definition of default used by the ECAI; (e) the dynamic properties and characteristics of the rating system or methodology; and (f) the geographical coverage (i.e. use of regional or global data).

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Division 4: IRBA
Sub-division 1: Application to Adopt the IRBA
7.4.1 A Reporting Bank which intends to adopt the IRBA for any class of exposures,
must apply in writing to the Authority for approval to do so.
7.4.2 Subject to paragraph 7.4.3, a Reporting Bank must ensure that the application
to adopt the IRBA for a class of exposures pursuant to paragraph 7.4.1 contains all of the following:
(a) a written confirmation from the executive officer responsible for risk management in the Reporting Bank that – (i) the use of rating systems and – (A) in the case of exposures for which the Reporting Bank is applying to adopt the F-IRBA to calculate the credit riskweighted exposure amounts, internal estimates of PD; and (B) in the case of exposures for which the Reporting Bank is applying to adopt the A-IRBA or the IRBA for the IRBA retail asset class to calculate the credit risk-weighted exposure amounts, internal estimates of PD, LGD and EAD, form an integral part of the systems and processes of the Reporting Bank for managing credit risk; (ii) the Reporting Bank has – (A) a process for managing the potential variability of its credit RWA over the business cycles of the respective industries and geographic regions which it is exposed to, to help ensure ongoing compliance with the minimum capital requirements specified in this Notice and bank-specific capital requirements set by the Authority pursuant to section 10(3) of the Banking Act; (B) carefully considered the implications of its IRBA systems on credit risk assessment and capital management; and (C) in the case where the Reporting Bank uses IRBA systems that would result in changes in its assessment of credit risk over a business cycle, ensured that its process for capital management is designed to address potential capital shortfalls in economic downturns; (iii) the Reporting Bank has a process for continually determining the suitability of its credit risk management strategy and framework as well as IRBA systems, taking into account such regulations, Notices

Monetary Authority of Singapore 7-72 and guidelines that the Authority may issue from time to time, including Annex 7X259 hereto; (iv) the Reporting Bank has systems, processes and controls to calculate credit RWA under the IRBA accurately and that those systems, processes and controls are subject to internal audit at least on an annual basis; (v) the Reporting Bank has a process to calculate the credit riskweighted exposure amount for any IRBA exposure using the SA(CR) in accordance with Sub-division 3 of Division 1 of this Part, within a 3-month period if required by the Authority; and (vi) the IRBA rollout plan of the Reporting Bank is in accordance with Sub-division 4 of this Division and meets the Guidelines in Annex 7Y; (b) a written confirmation from the executive officer responsible for internal audit of the Reporting Bank that – (i) he agrees with the confirmation by the executive officer responsible for risk management pursuant to sub-paragraph (a); and (ii) the Reporting Bank has – (A) been using its rating system for the class of exposures in a manner broadly in line with the minimum standards for use as set out in paragraph 2.7 of Annex 7X for at least one year prior to the application; (B) conducted an internal validation of the rating system referred to in sub-paragraph (b)(ii)(A), pursuant to Annex 7X; (C) ascertained that it has the systems, processes and controls necessary for adopting the IRBA; and (D) in areas where the internal validation referred to in subparagraph (b)(ii)(B) assesses that the Reporting Bank does not fully meet the requirements and guidelines of the Authority as set out in Annex 7X and Annex 7Z, conducted self-assessments to identify the key shortcomings, developed comprehensive action plans to address them, and identified in the action plans the personnel responsible for specific actions, resource needs and a schedule for completion260; (c) a report on the latest internal validation conducted by the Reporting Bank prior to the application and any relevant supporting documentation relating to the adoption of the IRBA for the class of exposures. For the 259 Annex 7X sets out the requirements of the Authority for a Reporting Bank adopting the IRBA. 260 The Reporting Bank should implement the measures described in its action plans within a reasonable timeframe. The Authority will take into consideration shortcomings identified and the Reporting Bank’s action plans to address them, including the schedule for completion, in its planning of the supervisory validation.

Monetary Authority of Singapore 7-73 purposes of this paragraph, the internal validation report must cover a duration of at least one year during which the Reporting Bank must have used its rating system for the class of exposures in a manner broadly in line with the minimum standards for use as set out in paragraph 2.7 of
Annex 7X.
7.4.3 Notwithstanding paragraph 7.4.2(a)(vi), the Reporting Bank need not provide
a written confirmation from the executive officer responsible for risk management in the Reporting Bank, that the IRBA rollout plan of the Reporting Bank is in accordance with Sub-division 4 of this Division and meets the Guidelines in Annex 7Y if the Reporting Bank is able to demonstrate to the satisfaction of the Authority that it faces exigencies that are material and relevant.
7.4.4 Despite the cancellation of MAS Notice 637 in force immediately before
1 July 2024, any application made by a Reporting Bank under paragraph 7.4.1 of that Notice, that is pending immediately before 1 July 2024, is treated as an application made by the Reporting Bank under paragraph 7.4.1 of this Notice. To avoid doubt, the Reporting Bank must comply with the requirements under Division 4 of Part VII of this Notice applicable to its application, including paragraphs 7.4.2, 7.4.5, 7.4.8 and 7.4.20 of this Notice. Sub-division 2: Submission of Information for Supervisory Validation Prior to IRBA Adoption
7.4.5 A Reporting Bank must calculate its CET1 CAR, Tier 1 CAR and Total CAR using
both the IRBA and the prevailing capital requirements that are applicable to the Reporting Bank under this Notice at both the Solo and Group levels (referred to as “parallel calculations” in this Sub-division) as at the end of each quarter for the latest 4 consecutive quarters before its intended IRBA adoption date. To avoid doubt, where the Reporting Bank revises its intended IRBA adoption date, the Reporting Bank must perform the parallel calculations for the latest 4 consecutive quarters prior to the revised intended IRBA adoption date.
7.4.6 Despite paragraph 7.4.5, the Authority may require a Reporting Bank to submit
additional parallel calculations as at other dates for other time periods, where necessary to ascertain the readiness of a Reporting Bank to adopt the IRBA.
7.4.7 To avoid doubt, for the purposes of paragraphs 7.4.5 and 7.4.6, the date on
which a parallel calculation is based may precede the date on which the IRBA application was submitted to the Authority.
7.4.8 A Reporting Bank must submit to the Authority all parallel calculations referred
to in paragraphs 7.4.5 and 7.4.6, before its intended IRBA adoption date, and within such timelines as specified by the Authority. To avoid doubt, where the Reporting Bank revises its intended IRBA adoption date, the Reporting Bank must submit to the Authority all parallel calculations, before the revised intended IRBA adoption date, and within such timelines as specified by the Authority.

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7.4.9 If a Reporting Bank becomes aware after the submission of its IRBA application
but before receiving approval to adopt the IRBA, that the confirmations made pursuant to paragraph 7.4.2(a) and (b) are no longer valid, it must – (a) inform the Authority in writing as soon as practicable and, in any case, no later than 5 business days of the Reporting Bank becoming aware, of the invalidity of any confirmation; (b) assess the effect of the invalidity of the confirmation(s) in terms of the risk(s) posed to the Reporting Bank (if any); (c) prepare a plan to rectify the issues that led to the invalidity of the confirmation(s) and inform the Authority of its plan (including its target completion date for the plan) as soon as practicable; and (d) undertake prompt corrective action within a reasonable time in accordance with the plan prepared pursuant to sub-paragraph (c).
7.4.10 Where there are findings arising from the Authority’s supervisory validation
which a Reporting Bank is required to address before its intended IRBA adoption date that could impact the parallel calculations previously submitted by a Reporting Bank under paragraph 7.4.8, the Authority may require the Reporting Bank, after it has addressed such findings, to recalculate and resubmit the parallel calculations previously submitted, or to submit additional parallel calculations, before its intended IRBA adoption date. To avoid doubt, where the Reporting Bank revises its intended IRBA adoption date, the Reporting Bank must, if required by the Authority, recalculate and resubmit the parallel calculations previously submitted, or submit additional parallel calculations, before the revised intended IRBA adoption date. Sub-division 3: Approval to Adopt the IRBA
7.4.11 The Authority may grant approval for a Reporting Bank to adopt the IRBA for a
class of exposures, subject to such conditions or restrictions as the Authority may impose. The Authority may at any time vary or revoke any existing conditions or restrictions of approval, or impose conditions or restrictions, or additional conditions or restrictions thereto.
7.4.12 A Reporting Bank must comply with the public disclosure requirements set out
in Part XI to be eligible to adopt the IRBA.
7.4.13 As part of its approval process, the Authority will consider whether –
(a) the Reporting Bank’s IRBA systems comply with the requirements and meet the guidelines set out in Annex 7X and Annex 7Z; (b) the risk management process and system of the Reporting Bank are adequate to support the IRBA; and (c) the Reporting Bank has addressed to the Authority’s satisfaction all findings arising from the Authority’s supervisory validation before its intended IRBA adoption date.

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7.4.14 The Authority may withhold approval for the Reporting Bank to adopt the IRBA
for a class of exposures if –
(a) during its supervisory validation, it becomes aware of information that materially affects its assessment of the readiness of the Reporting Bank to adopt the IRBA for the class of exposures; or (b) any outstanding finding identified during its supervisory validation that the Reporting Bank is required to address before its intended IRBA adoption date has not been addressed to the satisfaction of the Authority.
7.4.15 If a Reporting Bank becomes aware after it has received approval to adopt the
IRBA for a class of exposures that any of the confirmations made pursuant to paragraph 7.4.2(a) and (b) in force at the time the approval was granted are no longer valid, that it no longer complies with any of the conditions or restrictions imposed by the Authority pursuant to paragraph 7.4.11 or that it no longer complies with paragraph 7.4.12, it must – (a) inform the Authority in writing as soon as practicable and in any case no later than 5 business days of the Reporting Bank becoming aware, of the invalidity of any confirmations, any non-compliance with the conditions or restrictions pursuant to paragraph 7.4.11 or any non-compliance with paragraph 7.4.12, as the case may be; (b) assess the effect of the invalidity of the confirmation(s), non-compliance with the conditions or restrictions pursuant to paragraph 7.4.11 or noncompliance with paragraph 7.4.12, as the case may be, in terms of the risk(s) posed to the Reporting Bank (if any); (c) prepare a plan to rectify the issues that led to the invalidity of the confirmation(s), non-compliance with the conditions or restrictions pursuant to paragraph 7.4.11 or non-compliance with paragraph 7.4.12, inform and seek approval from the Authority of its plan (including its target completion date for the plan) as soon as practicable; and (d) undertake prompt corrective action within a reasonable time in accordance with the plan prepared pursuant to sub-paragraph (c).
7.4.16 The Authority may suspend or revoke its approval for a Reporting Bank to adopt
the IRBA for a class of exposures, subject the Reporting Bank to higher bank-specific capital requirements pursuant to section 10(3) of the Banking Act, or take any other actions if – (a) the Reporting Bank has not complied with any of the conditions or restrictions imposed by the Authority pursuant to paragraph 7.4.11; (b) the Reporting Bank has not complied with paragraph 7.4.12; (c) the Reporting Bank fails to comply with paragraph 7.4.15;

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(d) the Authority subsequently becomes aware that the Reporting Bank has furnished information that is false or misleading in a material manner to the Authority in connection with its application for approval to adopt the IRBA; (e) the Reporting Bank has not executed its IRBA rollout in accordance with Sub-division 4 of this Division; or (f) the Authority is not satisfied that the Reporting Bank is in compliance with the requirements in Annex 7X, or that the risk management process and system of the Reporting Bank are adequate to support the IRBA.
7.4.17 A Reporting Bank must inform the Authority no less than 3 months prior to the
expected date of implementation of any significant change to its IRBA systems subsequent to the Authority granting approval for the Reporting Bank to adopt the IRBA for a class of exposures, unless the Authority has directed that the Reporting Bank seeks prior approval for any such change. The Authority may also direct the Reporting Bank to seek approval prior to any significant change to its IRBA systems, subsequent to the notification by the Reporting Bank to the Authority.
7.4.18 Despite the cancellation of MAS Notice 637 in force immediately before 1 July
2024,
(a) any approval granted under paragraph 7.4.10 of that Notice, that was in force immediately before 1 July 2024, is treated as an approval granted under paragraph 7.4.11 of this Notice; and (b) any condition or restriction imposed by the Authority pursuant to paragraph 7.4.10 of that Notice will continue to apply as though it were imposed under paragraph 7.4.11 of this Notice.
7.4.19 A Reporting Bank granted the approval referred to in paragraph 7.4.18(a) must
comply with all applicable requirements in this Notice as though the approval was granted under paragraph 7.4.11 of this Notice, except that a reference to “confirmations made pursuant to paragraph 7.4.2(a) and (b) in force at the time the approval was granted” in paragraph 7.4.15 of this Notice must be read to mean “confirmations made pursuant to paragraph 7.4.2(a) and (b) of MAS Notice 637 in force immediately before 1 July 2024”. Sub-division 4: IRBA Rollout
7.4.20 A Reporting Bank must, in its application to the Authority to adopt the IRBA for
a class of exposures pursuant to paragraph 7.4.1, submit an IRBA rollout plan for the IRBA asset sub-class or combination of IRBA asset sub-classes, as set out in paragraph 1.2 of
Annex 7Y, specifying to what extent and when it intends to rollout the IRBA for the IRBA
asset sub-class or combination of IRBA asset sub-classes across business units of the banking group.
7.4.21 A Reporting Bank which has obtained IRBA approval for any class of exposures
pursuant to paragraph 7.4.11 must provide to the Authority the status of, and updates to, its IRBA rollout plan in respect of the IRBA asset sub-classes or combination of IRBA asset sub-classes, as set out in paragraph 1.2 of Annex 7Y every 12 months.

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7.4.22 Where a Reporting Bank adopts the IRBA for a class of exposures in –
(a) an IRBA asset sub-class; or
(b) combination of IRBA asset sub-classes; as set out in paragraph 1.2 of Annex 7Y, and the class of exposures fall within a particular business unit, it must apply the IRBA to all exposures within that business unit that fall within the same IRBA asset sub-class or combination of IRBA asset sub-classes.
7.4.23 For the purposes of paragraphs 7.4.20 and 7.4.22, a Reporting Bank must show
how it defines the boundaries of a putative business unit and how it allocates exposures to that business unit on an ongoing basis.
7.4.24 If a Reporting Bank that has adopted the IRBA for an IRBA asset sub-class or
combination of IRBA asset sub-classes, as set out in paragraph 1.2 of Annex 7Y, intends to adopt the SA(CR) or F-IRBA instead, it must only do so in exceptional circumstances which have been approved by the Authority261 .
7.4.25 A Reporting Bank may continue to use the supervisory slotting criteria for one
or more of the 4 categories of the SL asset sub-class as set out in Annex 7R or the HVCRE asset sub-class, and adopt the F-IRBA or A-IRBA for the other categories of the SL asset sub-class or the HVCRE asset sub-class. Where a Reporting Bank has adopted the F-IRBA or A-IRBA for the IPRE lending exposures under the SL asset sub-class, and where the IPRE lending exposures are material, the Reporting Bank must adopt the F-IRBA or AIRBA, as the case may be, for the HVCRE asset sub-class.
7.4.26 A Reporting Bank must not, during the period when it is rolling out the adoption
of the IRBA for the banking group, undertake intra-group transactions (including but not limited to asset sales or cross guarantees) which are designed to reduce the banking group’s aggregate capital requirements by transferring credit risk between entities on the SA(CR) and entities on the IRBA. Exclusions from the IRBA
7.4.27 Where a Reporting Bank adopts the IRBA for part of its exposures for an IRBA
asset sub-class or combination of IRBA asset sub-classes, as set out in paragraph 1.2 of
Annex 7Y, the Reporting Bank may exclude from the IRBA, exposures that would fall within
that IRBA asset sub-class or combination of IRBA asset sub-classes – (a) in the case of exposures arising from the acquisition of a new business or entity by the Reporting Bank – 261 Where a Reporting Bank has adopted the IRBA for the IRBA asset sub-class or combination of IRBA asset sub-classes as set out in paragraph 1.2 of Annex 7Y, it should continue to adopt the IRBA. The Reporting Bank may be allowed to adopt the SA(CR) or F-IRBA in instances such as a divestiture of a large fraction of the Reporting Bank’s credit-related business, subject to the approval by the Authority.

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(i) if the exposures acquired are immaterial in size and risk profile within the IRBA asset sub-class or combination of IRBA asset sub-classes; or (ii) the Reporting Bank will transition the exposures acquired onto the IRBA and incorporate the exposures as part of its IRBA rollout plan for the IRBA asset sub-class or combination of IRBA asset-sub classes, provided that the Reporting Bank had obtained the prior approval of the Authority, which may be subject to conditions imposed by the Authority with respect to the approval; and (b) in all other cases, if the exposures are immaterial in size and risk profile within the IRBA asset sub-class or combination of IRBA asset sub-classes, provided that the Reporting Bank had obtained the prior approval of the Authority, which may be subject to conditions imposed by the Authority with respect to the approval.
7.4.28 A Reporting Bank may exclude exposures that are mentioned in paragraph
7.4.27(b) from its IRBA rollout plan.
7.4.29 A Reporting Bank must use the SA(CR) to calculate the credit risk-weighted
exposure amounts for exposures excluded from the IRBA pursuant to paragraph 7.4.27. In such cases, the Authority may require the Reporting Bank to maintain additional capital under Part X for such exposures.
7.4.30 Despite paragraph 7.4.27, a Reporting Bank may use the SA(CR) to calculate
the credit risk-weighted exposure amounts for long settlement transactions on a permanent basis without any prior approval of the Authority.
7.4.31 For the purposes of obtaining the Authority’s approval in accordance with
paragraph 7.4.27(a)(i) and (b), as applicable, a Reporting Bank must show why the exposures falling within an IRBA asset sub-class or combination of IRBA asset sub-class that it proposes to exclude from the IRBA are considered to be immaterial both in terms of size and risk profile within their IRBA asset sub-class or combination of IRBA asset subclasses as set out in paragraph 1.2 of Annex 7Y. 262
7.4.32 When approving exclusions, the Authority will consider a Reporting Bank’s
ability to meet the threshold specified in paragraph 2.2 of Annex 7Y and risk concentrations that may be present in excluded portfolios.
7.4.33 Where a Reporting Bank has adopted the IRBA for an IRBA asset sub-class or
combination of IRBA asset sub-classes, as set out in paragraph 1.2 of Annex 7Y, the Reporting Bank must calculate the percentage of exposures excluded from the IRBA in each IRBA asset sub-class or combination of IRBA asset sub-classes as set out in paragraph 1.2 of Annex 7Y as follows:
[MAS Notice 637 (Amendment) 2024]
262 The Authority may revoke any approval previously given under paragraph 7.4.27(a)(i) or (b), if the exposures become material in size or risk profile.

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(a) for the IRBA sovereign asset sub-class, by dividing the total exposure amount of exposures excluded from the IRBA which would fall within the IRBA sovereign asset sub-class if the IRBA had been adopted (“excluded exposures”), by the aggregate of – (i) the total exposure amount of exposures under the IRBA sovereign asset sub-class; (ii) the total exposure amount of exposures transitioning to the IRBA sovereign asset sub-class; and (iii) excluded exposures, for all on-balance sheet assets and off-balance sheet items within the scope of paragraph 7.1.1(a), (b) and (f); (b) for all other IRBA asset sub-classes or combination of IRBA asset subclasses set out in paragraph 1.2 of Annex 7Y, by dividing the total RWA of exposures excluded from the IRBA for an IRBA asset sub-class or combination of IRBA asset sub-classes which would fall within that IRBA asset sub-class or combination of IRBA asset sub-classes if the IRBA had been adopted (“RWA of excluded exposures”), by the aggregate of – (i) the total RWA of exposures under that IRBA asset sub-class or combination of IRBA asset sub-classes; (ii) the total RWA of exposures transitioning to that IRBA asset sub-class or combination of IRBA asset sub-classes; and (iii) RWA of excluded exposures, for all on-balance sheet assets and off-balance sheet items within the scope of paragraph 7.1.1(a), (b) and (f).
7.4.34 For the purposes of paragraph 7.4.33(a), a Reporting Bank must calculate the
exposure amount of each exposure, whether such exposures are under the IRBA, transitioning to the IRBA or excluded from the IRBA, by applying the exposure measurement requirements in paragraphs 7.1.3(a) and 7.1.9(a).
7.4.35 For the purposes of paragraph 7.4.33(b), the Reporting Bank must calculate
the RWA of each exposure, whether such exposures are under the IRBA, transitioning to the IRBA or excluded from the IRBA, by applying the requirements in paragraphs 7.1.3 and 7.1.9.
7.4.36 For the purposes of the calculation in paragraph 7.4.33, a Reporting Bank
must –
(a) map its SA(CR) exposures to the relevant IRBA asset sub-class that the SA(CR) exposure would fall within, if the IRBA was applied for the exposure. A Reporting Bank may assume that SA(CR) exposures within the ADC asset sub-class would fall within the IRBA SL asset sub-class;

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(b) exclude the exposure amount of the following exposures from excluded exposures, and from the aggregate of exposure amounts set out in paragraph 7.4.33(a)(i) to (iii), for the calculation in paragraph 7.4.33(a):
(i) equity exposures set out in paragraphs 7.3.9 and 7.3.10; (ii) exposures required to be deducted from regulatory capital or riskweighted at 250% under paragraph 7.3.104; (iii) exposures risk-weighted at 1250% under paragraph 7.3.82; and (c) exclude the RWA of the following exposures from the RWA of excluded exposures, and from the aggregate of RWA amounts set out in paragraph 7.4.33(b)(i) to (iii), for the calculation in paragraph 7.4.33(b):
(i) equity exposures set out in paragraphs 7.3.9 and 7.3.10; (ii) exposures required to be deducted from regulatory capital or riskweighted at 250% under paragraph 7.3.104; (iii) exposures risk-weighted at 1250% under paragraph 7.3.82.
7.4.37 A Reporting Bank must ensure that exposures to CCPs arising from OTC
derivative transactions, exchange-traded derivative transactions and SFTs are treated in accordance with the relevant requirements set out under Division 7 of this Part, irrespective of materiality. [MAS Notice 637 (Amendment) 2024] Sub-division 5: Categorisation of IRBA Exposures
7.4.38 A Reporting Bank must categorise any IRBA exposure into an asset sub-class
belonging to the IRBA wholesale asset class, the IRBA retail asset class or the IRBA eligible purchased receivables asset class263 as defined in paragraphs 7.4.42 to 7.4.56.
7.4.39 A Reporting Bank must apply the specified treatment set out in this Sub-division
to each of its exposures for the purposes of deriving its regulatory capital adequacy requirements. A Reporting Bank must be able to demonstrate to the Authority that its methodology for assigning exposures to the different asset sub-classes is appropriate and consistent over time. Where the Authority deems that the methodology used by the Reporting Bank is not appropriate or may not result in broadly consistent categorisation across Reporting Banks, the Authority may require the Reporting Bank to re-categorise any exposure or class of exposures into asset sub-classes as set out in this Sub-division.
7.4.40 A Reporting Bank must treat any exposure within the scope of paragraph
7.1.1(a) that does not fall within any of the IRBA wholesale asset class, the IRBA retail 263 The categorisation of exposures into various asset sub-classes as set out in this Sub-division is intended to be consistent with established industry practice. However, the Authority recognises that a Reporting Bank may use different definitions and methodology for the purposes of internal reporting and risk measurement.

Monetary Authority of Singapore 7-81 asset class or the IRBA eligible purchased receivables asset class as an SA(CR) exposure under one of the following asset classes, whichever relevant, in accordance with Division 3 of this Part:
(a) cash items under paragraph 7.3.1(a);
(b) equity and subordinated debt asset class under paragraph 7.3.1(h); (c) other exposures asset class under paragraph 7.3.1(l).
7.4.41 In the case of a lease where the Reporting Bank is a lessor and is exposed to
residual value risk, the Reporting Bank must – (a) categorise the exposure to the lessee, calculated under paragraph 7.2.7(a), in accordance with paragraph 7.4.38; and (b) treat the exposure to the residual value of the leased assets, calculated under paragraph 7.2.7(b), in accordance with paragraph 7.4.40(c).
7.4.42 The IRBA wholesale asset class consists of the following asset sub-classes:
(a) general corporate asset sub-class, which consists of – (i) any IRBA exposure to a corporation, partnership, limited liability partnership, sole proprietorship, trust or fund (but excludes an exposure belonging to an asset sub-class set out in sub-paragraph (b), (c), (d), (e) or (f), paragraph 7.4.50(c), or paragraph 7.4.56(a), (b) or (c)); and (ii) any IRBA exposure to an individual (but excludes an exposure belonging to an asset sub-class set out in sub-paragraph (b), (c), (d), (e) or (f), paragraph 7.4.50(a), (b) or (c), or paragraph 7.4.56(a), (b) or (c)); (b) corporate small business asset sub-class, which consists of any IRBA exposure to a corporation, partnership, limited liability partnership, sole proprietorship, trust or fund (“business”) (but excludes an exposure belonging to an asset sub-class set out in sub-paragraph (c), (d), (e) or (f), paragraph 7.4.50(c), or paragraph 7.4.56(a), (b) or (c)), where the reported annual revenue of the business determined in accordance with paragraph 7.4.43 is less than or equal to S$100 million or where paragraph 7.4.45 applies. (c) sovereign asset sub-class, which consists of any IRBA exposure to – (i) the counterparties referred to in paragraph 7.3.1(b); (ii) a PSE, where such exposure would qualify for a 0% or 20% risk weight under the SA(CR) pursuant to paragraph 7.3.48 and Table 7- 3; or (iii) a qualifying MDB;

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(d) bank asset sub-class, which consists of any IRBA exposure – (i) to the counterparties referred to in paragraph 7.3.1(e)(i) to (v); (ii) to a PSE (but excludes an exposure referred to in sub-paragraph (c)(ii)); (iii) to an MDB which is not a qualifying MDB; or (iv) which is an eligible covered bond referred to in paragraph 7.3.2; (e) SL asset sub-class, which consists of any IRBA exposure that meets the characteristics set out in Annex 7R (but excludes an exposure belonging to the IRBA asset sub-class set out in sub-paragraph (f)); (f) HVCRE asset sub-class, which consists of any IRBA exposure that meets the characteristics set out in Annex 7R.
7.4.43 For the purposes of determining whether a business mentioned under
paragraph 7.4.42(b) has a reported annual revenue of less than or equal to S$100 million, the Reporting Bank must – (a) if the business is part of a group of companies as defined in section 209A of the Companies Act 1967, use the reported annual consolidated revenue of the group of companies; (b) have in place rigorous information gathering and timely updating processes to ensure that the reported annual revenue figure used is timely and relevant; (c) use an audited reported annual revenue figure, but where a business is established in a country or jurisdiction where the legislation governing the preparation of the business’s financial statement does not require audited financial statements to be maintained, the Reporting Bank may use unaudited accounts to ascertain the reported annual revenue figure; (d) subject unaudited accounts used to ascertain the reported annual revenue figures under sub-paragraph (c) to an internal or external independent verification conducted on an annual basis; (e) use a reported annual revenue figure taken from the most recent full-year financial statements, which must be for a financial period ending not more than 21 months before the time when the credit risk-weighted exposure amount for that IRBA exposure is calculated, unless paragraph 7.4.44 applies264; and (f) not categorise an exposure under the corporate small business asset subclass if it becomes aware of any event after the date of the financial 264 For example, a Reporting Bank must not use the reported annual revenue figure for the 12 months ending 31 Dec 2022 for calculating credit risk-weighted exposure amounts after 30 Sep 2024.

Monetary Authority of Singapore 7-83 statements referred to in sub-paragraph (e) that would reasonably cause an adjustment of the reported annual revenue of the business such that it is more than S$100 million.
7.4.44 Despite paragraph 7.4.43(e), where subsequent to the Reporting Bank’s initial
categorisation of an IRBA exposure into the corporate small business asset sub-class, a Reporting Bank is unable to obtain updated financial statements of the business, the Reporting Bank may use a reported annual revenue figure taken from full-year financial statements which are for a financial period ending more than 21 months before the time when the credit risk-weighted exposure amount for that IRBA exposure is calculated. In such a case, the Reporting Bank may continue to categorise such exposures under the corporate small business asset sub-class, but must not use the reported annual revenue
figure of the obligor in the Ksm formulas stated in paragraph 7.4.65.
7.4.45 For the purposes of paragraph 7.4.42(b), a Reporting Bank may include an IRBA
exposure to a business mentioned under paragraph 7.4.42(b), with reported total assets of less than or equal to S$100 million, provided that – (a) the Reporting Bank has in place internal policies setting out the types of entities and circumstances, where total revenue is not a meaningful indicator of the size of an entity and the use of reported total assets is more appropriate than reported annual revenue; (b) the internal policies mentioned in sub-paragraph (a) have been approved in writing by the Authority; (c) the Reporting Bank applies the reported total assets threshold and the internal policies mentioned in sub-paragraph (a) consistently to all exposures for each type of entity identified in those internal policies; and (d) based on the Reporting Bank’s application of the reported total assets threshold and internal policies mentioned in sub-paragraph (a), the total revenue is not a meaningful indicator of the size of the entity and the use of reported total assets is more appropriate than reported annual revenue.
7.4.46 For the purposes of paragraph 7.4.45 and determining whether a business
mentioned under paragraph 7.4.42(b) has reported total assets of less than or equal to S$100 million, the Reporting Bank must – (a) if the business is part of a group of companies as defined in section 209A of the Companies Act 1967, use the reported consolidated total assets of the group of companies; (b) have in place rigorous information gathering and timely updating processes to help ensure that the reported total assets figure used is timely and relevant; (c) use an audited reported total assets figure, but where a business is established in a country or jurisdiction where the legislation governing the preparation of the business’s financial statement does not require audited financial statements to be maintained, the Reporting Bank may use unaudited accounts to ascertain the reported total assets figure;

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(d) subject unaudited accounts used to ascertain the reported total assets figures under sub-paragraph (c) to an internal or external independent verification conducted on an annual basis; (e) use a reported total assets figure taken from the most recent full-year financial statements, which must be for a financial period ending not more than 21 months before the time when the credit risk-weighted exposure amount for that IRBA exposure is calculated, unless paragraph 7.4.47 applies265; and (f) not categorise an exposure under the corporate small business asset subclass if it becomes aware of any event after the date of the financial statements referred to in sub-paragraph (e) that would reasonably cause an adjustment of the reported total assets of the business such that it is more than S$100 million.
7.4.47 Despite paragraph 7.4.46(f), where subsequent to the Reporting Bank’s initial
categorisation of an IRBA exposure into the corporate small business asset sub-class, a Reporting Bank is unable to obtain updated financial statements of the business, the Reporting Bank may use a reported total assets figure taken from full-year financial statements which are for a financial period ending more than 21 months before the time when the credit risk-weighted exposure amount for that IRBA exposure is calculated. In such a case, the Reporting Bank may continue to categorise such exposures under the corporate small business asset sub-class, but must not use the reported total assets figure of the obligor in the Ksm formulas stated in paragraph 7.4.65;
7.4.48 For the purposes of paragraph 7.4.42, “fund” includes any collective investment
scheme or closed-end fund.
7.4.49 To avoid doubt, the general corporate asset sub-class in paragraph 7.4.42(a),
corporate small business asset sub-class in paragraph 7.4.42(b), and bank asset sub-class in paragraph 7.4.42(d) include exposures to the relevant entities listed in those paragraphs that are in the form of subordinated debt or regulatory capital instruments, provided that such instruments – (a) do not fall within the scope of equity exposures as set out in paragraphs
7.3.9 and 7.3.10;
(b) are not required to be deducted from regulatory capital or risk-weighted at 250% under paragraph 7.3.104; and (c) are not risk-weighted at 1250% under paragraph 7.3.82. A Reporting Bank must treat an instrument which meets one of the criteria in subparagraph (a), (b) or (c) as an SA(CR) exposure in accordance with Division 3 of this Part. 265 For example, a Reporting Bank must not use the reported total assets figure for the 12 months ending 31 Dec 2022 for calculating credit risk-weighted exposure amounts after 30 Sep 2024.

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7.4.50 The IRBA retail asset class266 consists of the following asset sub-classes set out
in sub-paragraphs (a) to (c):
(a) residential mortgage asset sub-class, which consists of any IRBA exposure (but excludes an exposure belonging to the asset sub-class set out in paragraph 7.4.56(c)) that meets all of the following conditions:
(i) the exposure is extended to –
(A) an individual;
(B) a group of individuals; or
(C) an association of individuals or a co-operative of individuals, where such association or co-operative is regulated under national law and is established only for the purposes of granting its members the use of a primary residence in the property securing the exposure; (ii) the exposure is managed by the Reporting Bank as part of a large pool of similar loans; (iii) the exposure is secured or partly secured against a mortgage of a residential property; (b) QRRE asset sub-class, which consists of any IRBA exposure (but excludes an exposure belonging to the asset sub-class set out in paragraph 7.4.56(c)) which meets all of the following conditions:
(i) the exposure is to an individual;
(ii) the exposure is managed by the Reporting Bank as part of a large pool of similar exposures; (iii) the exposure is to a revolving loan, and is unsecured, and uncommitted both contractually and in practice; (iv) the exposure, including any exposure in the QRRE asset sub-class to the same individual that is classified as in default in accordance with the definition of default in Annex 7L, together with other exposures in the QRRE asset sub-class to the same individual, is not more than S$200,000; (v) the Reporting Bank demonstrates to the satisfaction of the Authority that the exposures categorised under this asset sub-class exhibit a low volatility of loss rates, relative to the average level of loss rates, 266 For example, exposures to individuals granted revolving loans (e.g. credit cards, overdrafts, or retail facilities secured by financial instruments) as well as personal term loans and leases (e.g. instalment loans, auto loans and leases, student and educational loans, personal finance, or other exposures with similar characteristics) are eligible for retail treatment.

Monetary Authority of Singapore 7-86 at both the aggregate QRRE asset sub-class level and relevant subportfolio level where applicable, especially within the low PD bands; (vi) the Reporting Bank retains data on the loss rates for the purposes of analysis of loss volatilities; (vii) the Reporting Bank is able to demonstrate to the satisfaction of the Authority that treatment as QRRE is consistent with the underlying risk characteristics of the QRRE asset sub-class and the relevant subportfolio where applicable; (c) other retail exposures asset sub-class, which consists of any IRBA exposure (but excludes an exposure belonging to an asset sub-class set out in sub-paragraph (a) or (b), or paragraph 7.4.56(c)) that meets the following conditions:
(i) the exposure is to an individual and the exposure is managed as part of a large pool of similar exposures; or (ii) the exposure is to a small business and – (A) the total exposure of the Reporting Bank to the small business (on a consolidated basis where applicable) is not more than S$2 million, gross of CRM. 267 For the purposes of determining whether the S$2 million threshold is met, the Reporting Bank must – (I) include any exposure to the same small business that is classified as in default in accordance with the definition of default in Annex 7L, but must not include any IRBA exposure in the residential mortgage asset sub-class; (II) subject to paragraph 7.4.54, ensure that the basis of aggregation for total exposures to the small business on a consolidated basis, is the same basis on which the Reporting Bank treats an obligor in a group of obligors, for its risk management purposes, and must include exposures to related corporations of the obligor, and exposures to the sole proprietors or partners in any of the entities in the group of obligors; and (III) aggregate exposures to the same small business which are extended through or guaranteed by an individual; and 267 When an IRBA exposure categorised under the other retail exposures asset sub-class pursuant to this provision exceeds the S$2 million threshold, a Reporting Bank should re-categorise the exposure under the general corporate asset sub-class or corporate small business asset sub-class. The Authority will be flexible if the need for re-categorisation arises solely from short-term exchange rate fluctuations, for example, exchange rate fluctuations of non-Singapore dollar-denominated assets. In such cases, the Authority would expect the Reporting Bank to establish appropriate policies and procedures to determine when the threshold is exceeded in a more permanent way, for example, through the extension of increased credit or a major currency revaluation, and to re-categorise the exposures if necessary.

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(B) the exposure qualifies as a retail small business exposure in accordance with the internal written policies of the Reporting Bank, and is managed by the Reporting Bank as part of a large pool of similar exposures consistently over time and in the same manner as other exposures categorised under the IRBA retail asset class. This means that the exposure is originated in a similar manner to other exposures categorised under the IRBA retail asset class, and is not managed individually in a way comparable to exposures categorised under the general corporate asset sub-class or corporate small business asset sub-class, but rather as part of a pool of exposures with similar risk characteristics for the purposes of risk assessment and quantification.
7.4.51 The Reporting Bank must have controls to ensure that any inadvertent
assignment of exposures that do not meet the conditions in paragraph 7.4.50 to the IRBA retail asset class would be sufficiently immaterial that it would not result in any significant distortion of the overall statistical characteristics of the pools. To avoid doubt, the Reporting Bank must not use cost considerations to justify inclusion of exposures that do not meet the conditions in paragraph 7.4.50 if the effect on the statistical characteristics of the pools would be material.268
7.4.52 For the purposes of categorising an exposure in the QRRE asset sub-class under
paragraph 7.4.50(b), in the case where a Reporting Bank segments its QRRE asset subclass into 2 or more sub-portfolios, a Reporting Bank must ensure that such segmentation is performed in a manner consistent with the segmentation of its retail activities generally.269
7.4.53 The Reporting Bank must categorise an exposure in the QRRE asset sub-class
mentioned under paragraph 7.4.50(b) into any one of the following categories of exposures:
(a) QRRE transactor, which refers to an exposure in the QRRE asset sub-class to an obligor in relation to facilities including credit cards and charge cards where the billed balance has been repaid in full at or before each scheduled repayment date for the previous 12 months, or in relation to overdrafts that have not been drawn down over the previous 12 months; (b) QRRE revolver, which refers to any other exposure in the QRRE asset subclass that is not a QRRE transactor, including any exposure with less than 12 months of repayment history.
7.4.54 For the purposes of paragraph 7.4.50(c)(ii)(A)(II), the Reporting Bank may
disaggregate its exposures to an obligor in a group of obligors if it has assessed that the disaggregated obligor has sufficient financial resources to fully service the obligor’s liabilities and does not need to depend on any other entity within the group of obligors for financial assistance in meeting the liabilities. A Reporting Bank must not disaggregate based on product type alone. 268 Sample testing may be one method of demonstrating that such impact would be immaterial. 269 A Reporting Bank should, at a minimum, segment by country or jurisdiction.

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7.4.55 For the purposes of paragraph 7.4.50(c)(ii)(B), an exposure to a small business
will not normally be considered to be individually managed in a way comparable to exposures categorised under the general corporate asset sub-class or corporate small business asset sub-class if management of that exposure – (a) is sufficiently insignificant so as not to disrupt the homogeneity of the pool; (b) is consistent with the management of other exposures in the same pool; and (c) is significantly different in extent from the individual management that occurs for exposures categorised under the general corporate asset subclass or corporate small business asset sub-class, looked at as a whole.
7.4.56 The IRBA eligible purchased receivables asset class consists of the following
asset sub-classes:
(a) purchased corporate receivables asset sub-class, which consists of purchased receivables that meet the criteria for categorisation under the corporate asset sub-class; (b) purchased corporate small business receivables asset sub-class, which consists of purchased receivables that meet the criteria for categorisation under the corporate small business asset sub-class; (c) purchased retail receivables asset sub-class, which consists of purchased receivables that meet the criteria for categorisation under the IRBA retail asset class. Sub-division 6: Calculation of Capital Requirements, K, under the IRBA
7.4.57 Subject to paragraphs 7.4.58 and 7.4.61, a Reporting Bank using the IRBA
must –
(a) for an IRBA exposure not classified as in default in accordance with the definition of default in Annex 7L, calculate K for that exposure in accordance with Sub-divisions 8, 9, 10, and 11 of this Division, whichever is applicable; and (b) for an IRBA exposure that is classified as in default in accordance with the definition of default in Annex 7L, calculate K for that exposure in accordance with Sub-division 12. 270
7.4.58 A Reporting Bank must not use the A-IRBA for any of the following IRBA
exposures:
270 The credit RWA under the IRBA has been calibrated to cover only the unexpected losses that could arise from the credit and investment related risks of a Reporting Bank for exposures in the banking book. A Reporting Bank should consider whether it has set aside sufficient allowances to cover the EL amounts that could arise from such exposures. Paragraph 6.1.5(e) provides for the appropriate deduction in the calculation of CET1 Capital in the event that a Reporting Bank has not set aside sufficient allowances to cover the EL amounts that could arise.

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(a) exposures categorised in the general corporate asset sub-class in paragraph 7.4.42(a), to an entity which belongs to a group with total consolidated annual revenue greater than S$750 million; (b) exposures categorised in the bank asset sub-class in paragraph 7.4.42(d); (c) exposures to any financial institution, including exposures to securities firms and insurance companies, which are categorised in the general corporate asset sub-class in paragraph 7.4.42(a) or corporate small business asset sub-class in paragraph 7.4.42(b).
7.4.59 For the purposes of determining whether the S$750 million total consolidated
annual revenue threshold in paragraph 7.4.58(a) is met, the Reporting Bank must use the reported total revenue of the entity. For an entity that is part of a consolidated group, the Reporting Bank must use the reported total revenue of the consolidated group of companies which includes the entity, according to the accounting standard applicable to the ultimate parent of the consolidated group. In calculating the total consolidated annual revenue, the Reporting Bank must – (a) calculate the average reported total annual revenue based on the past 3 consecutive financial years270A of audited financial statements; or [MAS Notice 637 (Amendment) 2024] (b) where financial statements for any one or more of the past 3 consecutive financial years are available, use the reported total annual revenue for the financial year with the most recent audited financial statements. [MAS Notice 637 (Amendment) 2024]
7.4.60 For the purposes of calculating Kcorp, Ksov, Kbank, Ksl, Ksm, Khv, Kmort, Kqrre and Koret
in Sub-divisions 8 and 9 of this Division –
(a) Ln denotes the natural logarithm;
(b) N(x) denotes the cumulative distribution function for a standard normal random variable (i.e. the probability that a normal random variable with mean zero and variance of one is less than or equal to x)271; and (c) G(z) denotes the inverse cumulative distribution function for a standard normal random variable (i.e. the value of x such that N(x) = z)272 . 270A As an example, for an entity or consolidated group, as the case may be, whose financial year ends on 31 December 2023 – (a) as of 31 December 2023, the “past 3 consecutive financial years” would refer to 1 January 2020 to 31 December 2022; and (b) as of 31 March 2024, 30 June 2024 and 30 September 2024, the “past 3 consecutive financial years” would refer to 1 January 2021 to 31 December 2023. [MAS Notice 637 (Amendment) 2024] 271 The normal cumulative distribution function is, for example, available in Excel as the function NORMSDIST. 272 The inverse of the normal cumulative distribution function is, for example, available in Excel as the function NORMSINV.

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Sub-division 7: Calculation of Capital Requirements, K, and Determination of Risk Weights, RWslot, for Exposures in the SL Asset Sub-Class and HVCRE Asset Sub-Class under the IRBA
7.4.61 For any IRBA exposure belonging to the SL asset sub-class or HVCRE asset subclass, a Reporting Bank must –
(a) if the Reporting Bank complies with the requirements for wholesale exposures under the F-IRBA in Annex 7X for deriving estimates of PD for such exposures, or the requirements for wholesale exposures under the A-IRBA in Annex 7X for deriving estimates of PD, LGD and EAD for such exposures, calculate K for that exposure in accordance with Sub-division 6 of this Division; and (b) in all other cases, determine RWslot for that exposure in accordance with the supervisory slotting criteria set out in Sub-division 13 of this Division. Sub-division 8: Calculation of K for IRBA Wholesale Asset Class Calculation of Kcorp, Ksov, Kbank and Ksl
7.4.62 A Reporting Bank must calculate Kcorp, Ksov, Kbank and Ksl for an IRBA exposure
in the general corporate, sovereign, bank and SL asset sub-classes, respectively, using the following formula:
Correlation (R) = 0.12 ×
(1−𝑒
−50 ×𝑃𝐷)
(1−𝑒−50)

0.24 × (1 −
(1− 𝑒
−50 ×𝑃𝐷)
(1−𝑒−50)
)
Maturity adjustment (b) = [0.11852 − 0.05478 × ln(𝑃𝐷)] 2 Capital requirement (Kcorp, Ksov, Kbank or Ksl) = [𝐿𝐺𝐷 × 𝑁 [ 𝐺(𝑃𝐷) √(1−𝑅)
√
𝑅
1−𝑅
× 𝐺(0.999)]− 𝑃𝐷 × 𝐿𝐺𝐷] ×
(1+(𝑀−2.5)×𝑏)
(1−1.5×𝑏)
Illustrative risk weights are set out in Annex 7AA.
7.4.63 Despite paragraph 7.4.62, for all IRBA exposures to financial institutions subject
to minimum prudential standards and supervision by a financial regulatory agency (“regulated financial institutions”) with total assets greater than or equal to USD 100 billion (or equivalent), and financial institutions which are not subject to minimum prudential standards and supervision by a financial regulatory agency (“unregulated financial institutions”), a Reporting Bank must calculate Kcorp, Kbank and Ksl using the following formula:

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Correlation (R_FI) = 1.25 × [0.12 ×
(1−𝑒
−50 ×𝑃𝐷)
(1−𝑒−50)

0.24 × (1 −
(1− 𝑒
−50 ×𝑃𝐷)
(1−𝑒−50)
)]
Maturity adjustment (b) = [0.11852 − 0.05478 × ln(𝑃𝐷)] 2 Capital requirement (Kcorp, Kbank or Ksl) = [𝐿𝐺𝐷 × 𝑁 [ 𝐺(𝑃𝐷) √(1−𝑅_𝐹𝐼)
√
𝑅_𝐹𝐼
1−𝑅_𝐹𝐼
× 𝐺(0.999)] −𝑃𝐷 × 𝐿𝐺𝐷] ×
(1+(𝑀−2.5)×𝑏)
(1−1.5×𝑏)
For the purposes of determining whether the USD 100 billion (or equivalent) total assets threshold is met, the Reporting Bank must use the reported total assets of the consolidated group of companies which include the regulated financial institution. The reported total assets figure must be taken from the most recent audited financial statements.
7.4.64 For the purposes of paragraph 7.4.63 –
(a) “financial institution” refers to an entity specified in Annex 2A, a collective investment scheme or a closed-end fund; and (b) the Authority may from time to time specify any entity or group of entities as unregulated financial institutions. Calculation of Ksm
7.4.65 A Reporting Bank must calculate Ksm for an IRBA exposure in the corporate
small business asset sub-class using the following formula:
Correlation (R) = 0.12 ×
(1−𝑒
−50 ×𝑃𝐷)
(1−𝑒−50)
0.24 × (1−
(1−𝑒
−50 ×𝑃𝐷)
(1−𝑒−50)
)− 0.04 × (1−
(𝑆−10)
90 )
Maturity adjustment (b) = [0.11852 − 0.05478 × ln(𝑃𝐷)] 2 Capital Requirement (Ksm) =[𝐿𝐺𝐷 × 𝑁 [ 𝐺(𝑃𝐷) √(1−𝑅)
√
𝑅
1−𝑅
× 𝐺(0.999)] −𝑃𝐷 × 𝐿𝐺𝐷] ×
(1+(𝑀−2.5)×𝑏)
(1−1.5×𝑏) where “S” refers to total reported annual revenue, or reported total assets where a Reporting Bank has included an IRBA exposure to an obligor in the corporate small business sub-class pursuant to paragraph 7.4.45, of the obligor (calculated in millions of Singapore dollars), or if the obligor is part of a consolidated group, of the consolidated group. Where the reported annual revenue figure or reported total assets figure, as the case may be, is less than S$10 million, the Reporting Bank must apply S = 10 for the purposes of calculating Ksm. Where the Reporting Bank is not permitted to use the total reported annual revenue or reported total assets of the obligor in the Ksm formula in accordance with paragraph 7.4.44 or 7.4.47, the Reporting Bank

Risk Based Capital Adequacy Requirements for Banks Incorporated in Singapore

Lineage: Amended

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