Banks Act, 1990 (Act No. 94 of 1990)

Regulations

Regulations relating to Banks

Chapter II : Financial, Risk-based and other related Returns and Instructions, Directives and Interpretations relating to the completion thereof

23. Credit risk: monthly return

Directives and interpretations for completion of monthly return concerning credit risk (Form BA 200)

Subregulation (12) Credit risk mitigation: foundation IRB approach

Subregulation (12)(c) Pools of collateral

Purchase

When a bank obtained both eligible financial collateral and other eligible collateral, that is, collateral that is regarded as eligible collateral in terms of the foundation IRB approach but not in terms of the standardised approach, in respect of the bank's exposure to corporate institutions, sovereigns or banks, the bank—

(i)	shall subdivide the adjusted value of the exposure, after the bank has applied the relevant haircut relating to eligible financial collateral, into the relevant portions covered by only one type of collateral, that is, the bank shall divide the exposure into a portion covered by—

(A)	eligible financial collateral;

(B)	receivables;

(C)	collateral consisting of commercial real estate or residential real estate;

(D)	other collateral;

and, when relevant, an unsecured portion.

When the ratio of the sum of the values of commercial real estate or residential real estate, and other collateral, to the reduced exposure, after the effect of eligible financial collateral and collateral consisting of receivables has been recognised, is below the relevant threshold level specified in paragraph (b)(iii)(B)(i) above, the bank shall assign to the relevant exposure an LGD ratio relating to an unsecured exposure, that is, 45 per cent.

(ii)	shall separately calculate the risk-weighted exposure in respect of each fully secured portion of exposure in order to calculate the exposure's effective LGD and aggregated risk-weighted amount.