Regulatory Alerts2015-05-21
Matters Related to the Use of Support in a Bank's Credit Risk Rating Process
The South African Reserve Bank’s Office of the Registrar of Banks prohibits banks, particularly internal ratings-based (IRB) institutions, from using implicit support in their credit risk rating processes and minimum capital calculations. This directive mandates that only explicitly stated, legally enforceable support qualifies for rating adjustments, thereby preventing banks from arbitrarily retaining lower capital reserves based on expert judgment. While historical data reflecting non-contractual parental or governmental support may remain unchanged, institutions must contact the Registrar if they cannot comply with these reinforced regulatory requirements.
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