Regulatory Alerts2017-03-18
Adjusting the Loss Given Default (LGD) Rate for the Corporate Sector from 60% to 50%
The Saudi Central Bank adjusts the Loss Given Default (LGD) rate for unsecured senior corporate exposures from 60% to 50%, establishing a 50% floor and 60% cap for non-defaulted cases while retaining actual bank-calculated LGD for defaulted exposures. Banks must apply this revised rate when calculating Pillar 1 and Pillar 2 capital requirements, including Internal Capital Adequacy Assessment Process (ICAAP) documentation and Foundation Internal Ratings-Based (F-IRB) transition applications. This regulatory amendment takes effect on April 1, 2017, and amends Paragraph 29 of Circular No. 5318 to align with IFRS 9 standards and Basel framework applications.
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