Regulatory Alerts2017-09-19
Basel III Leverage Ratio Framework
The Saudi Arabian Monetary Agency (SAMA) requires all domestic banks to review the Bank for International Settlements' October 2014 Frequently Asked Questions (FAQs) on the Basel III leverage ratio framework as part of its domestic implementation guidelines. The document clarifies five critical areas, including cash variation margin recognition for derivatives, centrally cleared client exposures, securities financing transaction netting, cross-product netting agreements, and credit derivative exposure measures. By aligning these technical clarifications with SAMA’s August 2014 circular, the agency ensures consistent global application of leverage ratio standards ahead of the January 2015 effective date.
Saudi Arabian Monetary Agency
Banking Supervision Dept.
October 2014
From : Saudi Arabian Monetary Agency CC : H.E. The Deputy Governor for Supervision To : All Banks Attention : CFOs and CROs Subject: BCBS Document issued in October 2014 regarding Frequently Asked Questions on the Basel III Leverage Ratio Framework
SAMA refers to its circular # 351000133367 dated 25 August, 2014 regarding its guidance on the implementation of the BCBS document of January 2014 entitled "Basel III Leverage Ratio Framework" for implementation in January 2015. Recently, the BCBS has issued a document entitled "Frequently Asked Questions on Basel III Leverage Framework" that addresses various issues raised by the banks.
To promote consistent global implementation of the Basel requirements, the Committee has agreed to periodically review frequently asked questions (FAQs) and publish answers along with any technical elaboration of the standards text and interpretative guidance that may be necessary.
This document sets out the first set of FAQs that relate to the Basel III leverage ratio framework. The questions and answers are grouped according to different areas, which are in the order (i) criteria for the recognition of cash variation margin associated with derivative exposures (section 1); (ii) centrally cleared client derivative exposures (section 2); (iii) netting of securities financing transactions (SFTs) (section 3); (iv) the treatment of netting of SFTs and derivatives under a cross-product netting agreement (section 4); and (v) the exposure measure under the additional treatment for credit derivatives (section 5).
This document can be obtained from the BCBS Website (www.bis.org) which banks must review in the context of SAMA's implementation framework.
Best regards,
Alwaleed Alsheikh Director of Banking Supervision
P. O. Box 2992 - Riyadh 11169, Saudi Arabia - Tel.: 01-463 3000 - Telex 404390 SJ - Fax 01-466 2119