Regulatory Alerts2020-04-07
Treatment of restructured credit exposures due to the Coronavirus (Covid-19) pandemic
The Prudential Authority has issued Directive D3/2020 to temporarily amend capital requirements for South African banks by allowing Covid-19-related loan restructures, such as payment holidays, to be classified as non-distressed. Banks must verify that restructured retail and corporate loans were up-to-date as of 29 February 2020 and are expected to remain so, applying the pre-restructure risk weights or probabilities of default without reducing them. This directive mandates robust internal governance processes to justify each restructure, extends for a minimum of six months pending economic normalization, and prevents inappropriate capital increases while maintaining sound lending standards.
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