Regulatory Alerts2025-08-06
Prudential Treatment of Credit Exposures Secured by Forest and Agricultural Land
The Prudential Authority directs South African banks and foreign branches to apply specific risk weights to credit exposures secured by forest and agricultural land under the Banks Act 1990. The directive clarifies that such land need not be fully completed and establishes distinct risk weight tiers for residential and commercial exposures, including 100 percent for residential land development and 150 percent for commercial land development or unhedged currency risks. Banks must classify these exposures according to existing real estate regulations, apply the prescribed risk weights or default to unsecured counterparty rates at the regulator’s discretion, and ensure external auditors receive a copy of the directive.
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