Regulatory Alerts2010-06-25
Application Process for Adopting the Internal Ratings-Based Approach for Banking Book Credit Risk Exposure
The South African Reserve Bank’s Bank Supervision Department requires banks to obtain prior written approval to adopt the foundation or advanced Internal Ratings-Based approaches for calculating regulatory capital on banking book credit risk exposures. The mandated two-stage application process spans up to 18 months, incorporating a compulsory six-month parallel run period to validate internal systems and monitor capital impacts before full implementation. Applicants must submit detailed documentation covering governance structures, risk parameter estimation, stress testing, data management, and independent validation, with all materials formally certified by the chief executive officer and board chairperson.
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