Regulatory Alerts2020-12-08
Calculation of Derivative Exposure Amount for Leverage Ratio Purposes
The Prudential Authority requires South African banks, controlling companies, and foreign branches to calculate leverage ratio exposures using the Standardised Approach for Counterparty Credit Risk (SA-CCR) framework. This directive mandates a fixed formula where exposure equals 1.4 times the sum of replacement cost and potential future exposure, while detailing specific rules for netting, collateral treatment, cash variation margins, and written credit derivatives. Institutions must implement these standardized calculations concurrently with the amended Regulations to ensure consistent risk-based capital and leverage ratio reporting.
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