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 (21) Expected loss

Purchase

(21) Expected loss

A bank that adopted the IRB approach for the measurement of the bank's exposure to credit risk shall calculate an aggregate amount in respect of the bank's expected losses, which aggregate expected loss amount—

(a) shall exclude any expected losses in respect of—

(i)	the bank's equity exposures subject to the PD/LGD approach prescribed in regulation 31(6)(c);

(ii)	credit exposures resulting from a securitisation scheme;

(b)	shall be determined by multiplying the expected loss ratio relating to a particular credit exposure with the relevant EAD amount;

(c)	shall in the case of—

(i)	credit exposures relating to corporate institutions other than specialised lending mapped into the standardised risk grades specified in subregulation (11)(d)(iii)(C), sovereigns, banks and the bank's retail portfolios, which exposures—

(A)	are not in default, and

(B)	do not constitute protected exposures or eligible exposures subject to the double default approach,

be calculated by multiplying the exposure's relevant PD ratio with its LGD ratio;

(ii)	credit exposures relating to corporate institutions, sovereigns, banks and the bank's retail portfolios, which exposures are in default, be calculated by estimating the expected loss amount through the application of the relevant LGD ratio;

(iii)

exposures relating to specialised lending mapped into the standardised risk grades specified in subregulation (11)(d)(iii)(C), excluding exposures relating to high-volatility commercial real estate, be calculated by multiplying the relevant EAD amount with the minimum required capital adequacy ratio prescribed in accordance with the relevant provisions of regulation 38(8)(b), and the risk weights specified in table 22 below:

Table 22

Rating grade
Strong	Good	Satisfactory	Weak	Default
5%	10%	35%	100%	625%

(iv)

exposures relating to high-volatility commercial real estate mapped into the standardised risk grades specified in subregulation (11)(d)(iii)(C), be calculated by multiplying the relevant EAD amount with the minimum required capital adequacy ratio prescribed in accordance with the relevant provisions of regulation 38(8)(b),and the risk weights specified in table 23 below:

Table 23

Rating grade
Strong	Good	Satisfactory	Weak	Default
5%	5%	35%	100%	625%

(v)	other exposures, including any protected exposure or eligible exposure subject to the double default approach, be deemed to be equal to nil.