Government Gazette

Staatskoerant

REPUBLIC OF SOUTH AFRICA

REPUBLIEK VAN SUID-AFRIKA

Regulation Gazette
No. 10403
Regulasiekoerant

Vol. 597
Pretoria, 27 March 2015
Maart 2015
No. 38616

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CONTENTS • INHOUD

No.	Page No.	Gazette No.
GOVERNMENT NOTICE
National Treasury
Government Notice
R. 261 Banks Act (94/1990): Amendment of Regulations	5	38616

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GOVERNMENT NOTICE

NATIONAL TREASURY
No. R. 261
27 March 2015

BANKS ACT, 1990 (ACT NO. 94 OF 1990)
AMENDMENT OF REGULATIONS

The Minister of Finance has under section 90 of the Banks Act, 1990 (Act No. 94 of 1990), made the regulations contained in the Schedule.

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SCHEDULE

Definitions

1. In this Schedule, "the Regulations" means the Regulations published under Government Notice No. R. 1029, in Government Gazette No. 35950 on 12 December 2012.

Amendment of regulation 23 of the Regulations
2. Regulation 23 of the Regulations is hereby amended:
(a) by the deletion of footnote 3 below Table 3 of subregulation (6)(h)(i), which currently reads "3. Or such imputed percentage that will effectively result in an amount equivalent to a deduction against capital and reserve funds."
(b) by the substitution of sub-item (ii) of subregulation (6)(h)(iii)(B) with the following sub-item (ii):
"(ii) when the bank is unable to determine the risk weights assigned to the underlying assets or credit exposures, the bank shall assign to the relevant amount related to the said unrated most senior position a risk weight of 1250 per cent."
(c) by the substitution of sub-item (ii) of subregulation (6)(h)(vii)(A) with the following sub-item (ii):
"(ii) a facility other than a facility with an external rating, irrespective of the maturity of the facility, apply a credit-conversion factor of 50 per cent in respect of the said eligible liquidity facility, which credit-conversion factor shall be applied to the highest risk weight assigned to any of the underlying individual exposures covered by the liquidity facility."
(d) by the substitution of the entries in column 2 of Table 7 of subregulation (6)(j) in respect of a risk weight of 20% relating to exposures to banks in the RSA and a securities firm in the RSA, with the following entries:
"Banks in the RSA, provided that the claim on the bank has an original maturity of three months or less and is denominated and funded in Rand, excluding any claim on a RSA bank that is renewed or rolled resulting in an effective maturity of more than three months"
"A securities firm in the RSA, provided that such a firm is subject to comparable supervisory and regulatory arrangements than banks in the RSA, including, in particular, risk-based capital requirements and regulation and supervision on a consolidated basis and the claim on the securities firm has an original maturity of three months or less and is denominated and funded in Rand, excluding any claim on a securities firm in the RSA that is renewed or rolled resulting in an effective maturity of more than three months".

(e) by the deletion of footnote 1 of Table 7 of subregulation (6)(j) directly below the entry that specifies a risk weight of 1250% in column 1, which footnote currently reads "1. Or such imputed percentage that effectively results in a risk weighted exposure amount equivalent to a deduction against capital and reserve funds."
(f) by the substitution of footnote 3 below Table 8 of subregulation (8)(a) with the following footnote 3:
"3. Claims with an original maturity of three months or less and denominated and funded in Rand, excluding a claim which is renewed or rolled, resulting in an effective maturity of more than three months."
(g) by the deletion of footnote 2 below Table 11 of subregulation (9)(d)(ii)(C)(i), which currently reads "2. Or such imputed percentage that will effectively result in an amount equivalent to a deduction against capital and reserve funds."
(h) by the substitution of sub-item (ii) of subregulation (9)(d)(ii)(C) with the following sub-item (ii):
"(ii) In the case of unrated exposures, the protection seller shall maintain capital against each of the reference assets, reference entities or underlying assets in the basket by aggregating the risk weights of the assets included in the basket up to a maximum of 1250 per cent and multiplying the aggregated risk weight with the notional amount of the protection provided."
(i) by the substitution of subparagraph (vii) of subregulation (11)(a) with the following subparagraph (vii):
"(vii) shall risk weight such amounts as specified in paragraph (q) below."
(j) by the substitution of subparagraph (ii) of subregulation (11)(b) with the following subparagraph (ii):
"(ii) For a minimum period of three years prior to a bank’s implementation of the foundation IRB approach for the measurement of the bank’s exposure to credit risk, the rating and risk estimation systems and processes of the bank should have-"
(k) by the substitution of sub-sub-item (aa) of subregulation (11)(b)(v)(B)(i) with the following sub-sub-item (aa):
"(aa) the bank shall in the case of concentrations within a single grade or grades have convincing empirical evidence that-
(i) the grade or grades cover sufficiently narrow PD bands;
(ii) the default risk posed by borrowers in a particular grade falls within the specific band;"

(l) by the substitution of sub-sub-item (bb) of subregulation (11)(b)(v)(D)(i) with the following sub-sub-item (bb):
"(bb) transaction risk, which transaction risk shall include matters relating to product and collateral types such as loan-to-value or lending-to-value measures, guarantees and seniority, and any cross-collateral provision where present;"
(m) by the substitution of sub-item (iii) of subregulation (11)(b)(v)(I) with the following sub-item (iii):
"(iii) shall duly indicate any differences between the bank’s risk estimates for purposes of complying with the IRB approach and for internal risk management purposes, such as pricing, provided that when a bank does not use the same estimates for both IRB and internal purposes, the bank shall not only document such differences but shall also be able to demonstrate their reasonableness to the satisfaction of the Registrar."
(n) by the substitution of sub-sub-item (cc) of subregulation (11)(b)(vi)(A)(i) with the following sub-sub-item (cc):
"(cc) Statistical default models, that is, the bank may use a simple average of default-probability estimates in respect of individual borrowers assigned to a particular grade, which estimates were generated by statistical default prediction models, provided that the statistical model shall comply with the relevant minimum requirements specified in subparagraph (v)(H) above;"
(o) by the substitution of sub-sub-item (dd) of subregulation (11)(b)(xii)(D)(iii) with the following sub-sub-item (dd):
"(dd) a facility in respect of which neither the bottom-up approach nor the top-down approach can be applied to calculate the KIRB amount specified in paragraph (k) below, obtain the prior written approval of the Registrar to temporarily apply the highest risk weight assigned in terms of the standardised approach to any of the underlying individual exposures covered by the liquidity facility and a credit-conversion factor of 100 per cent;"
(p) by the substitution of sub-sub-item (ee) of subregulation (11)(b)(xii)(D)(iii) with the following sub-sub-item (ee):
"(ee) all liquidity facilities other than the liquidity facilities envisaged above, assign to the relevant notional amount of the said liquidity facility a risk weight of 1250 per cent;"
(q) by the substitution of sub-item (v) of subregulation (11)(b)(xii)(D) with the following sub-item (v):
"(v) none of the approaches specified in sub-items (i) or (ii) above can be applied to a securitisation exposure other than a liquidity facility, the bank shall assign to the relevant exposure amount a risk weight of 1250 per cent."

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