Regulatory Alerts2018-08-14
D2/2018: Materiality Threshold in Respect of Exposure to a Foreign Jurisdiction in Applying Jurisdictional Reciprocity in the Countercyclical Capital Buffer Calculation
The South African Reserve Bank’s Prudential Authority directs all banks, controlling companies, and foreign branches to apply a 2% materiality threshold when calculating countercyclical capital buffers under jurisdictional reciprocity rules. Credit exposures to foreign jurisdictions representing at least 2% of a bank’s total risk-weighted assets are treated as material and allocated to their respective jurisdictions, while sub-threshold exposures are aggregated with the home jurisdiction. Banks must calculate these thresholds quarterly across solo, consolidated, and foreign entity levels, incorporating the three most significant sub-threshold foreign jurisdictions into their weighted average buffer calculations and disclosing the methodology in regulatory templates.