Regulatory Alerts2025-05-23
C2-2025 Interpretation and Application of Granularity Criteria for Retail Exposures
The Prudential Authority’s Draft Circular C2/2025 clarifies the interpretation and application of granularity criteria for retail exposures under South Africa’s proposed banking regulations. Banks must calculate aggregate exposure to each counterparty on a consolidated basis, excluding residential mortgages and exposures exceeding R12.5 million, to determine whether they fall below or above the 0.2 per cent threshold for preferential risk weighting. Exposures meeting this threshold receive a 75 per cent risk weight, while those exceeding it are assigned a 100 per cent weight but remain classified within the retail portfolio, with the directive taking effect upon implementation of the proposed amendments and replacing Circular 5 of 2020.
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