Medicines and Related Substances Act, 1965
R 385
Banks Act, 1990 (Act No. 94 of 1990)RegulationsRegulations relating to BanksChapter II : Financial, Risk-based and other related Returns and Instructions, Directives and Interpretations relating to the completion thereof23. Credit risk: monthly returnDirectives and interpretations for completion of monthly return concerning credit risk (Form BA 200)Subregulation (14) Credit-risk mitigation: advanced IRB approachSubregulation (14)(f) Double default |
(f) Double default
| (i) | Minimum requirements |
In respect of each eligible exposure as envisaged in subregulation (12)(g)(ii), a bank that obtained the prior written approval of the Registrar to adopt the advanced IRB approach for the measurement of the bank's exposure to credit risk may apply either the substitution approach envisaged in paragraphs (c) and (d) above or the double default approach specified in this paragraph (f), provided that a bank that wishes to apply the double default approach—
| (A) | shall continuously comply with the relevant requirements specified in subregulation (12)(g); |
| (B) | in respect of eligible exposure shall calculate the relevant riskweighted exposure amount and any related required amount of capital and reserve funds in accordance with the relevant formulae and requirements specified in subregulation (12)(g) read with the relevant provisions of this paragraph (f); |
| (C) | shall calculate the risk weights and required amount of capital and reserve funds relating to all exposures to a particular obligor, other than eligible exposures specified in this paragraph (f), in accordance with the relevant requirements specified in subregulations (13) and (14), including any risk weight and required amount of capital and reserve funds relating to any unhedged or unprotected portion of an exposure in respect of which the hedged or protected portion is subject to the provisions of this paragraph (f); |
| (D) | may apply the said approach to any eligible exposure, irrespective whether the said exposure is held in the bank's banking book or trading book. |
| (ii) | Matters specifically related to risk-weighted exposure and the required amount of capital and reserve funds |
In respect of any hedged or protected exposure subject to the double default approach, the reporting bank shall calculate its risk-weighted exposure and related required amount of capital and reserve funds through the application of the relevant formulae specified in subregulation (12)(g), provided that—
| (A) | when estimating any of the required LGD ratios the bank may recognise collateral posted exclusively against the relevant exposure or credit protection, provided that the bank shall in all cases comply with the relevant minimum requirements relating to LGD, specified in subregulation (13)(b)(v); |
| (B) | the bank shall in no case apply a principle of double recovery when the bank estimates any required LGD ratio. |
