Regulatory Alerts2020-12-07
C4-2020: Application of Requirements Relating to Residential Mortgages
The South African Prudential Authority issued Circular 4/2020 to clarify the regulatory criteria for calculating capital requirements on exposures secured by residential mortgage bonds. The directive defines total exposure as the combined on- and off-balance sheet amounts after applying credit conversion factors, explicitly extends coverage to trusts and close corporations with personal surety, and supersedes Circular 4/2014. It mandates a standardized classification matrix that assigns risk weights of 35, 75, or 100 percent based on loan-to-value thresholds, granularity assessments, and exposure limits to eliminate reporting inconsistencies.
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