Banks Act, 1990 (Act No. 94 of 1990) Regulations Regulations relating to Banks Chapter VII : Definitions and General Provisions 67. Definitions

 

In these Regulations, "the Act" means the Banks Act, 1990 (Act No. 94 of 1990), and any word or expression to which a meaning has been assigned in the Act shall bear the meaning so assigned thereto and, unless the context otherwise indicates—

 

"actual distribution"

in relation to a bank's exposure to counterparty credit risk means the distribution of market values or exposures in respect of a future time period, which distribution is calculated based on historic or realised values such as calculated volatilities based on past price or rate changes;

 

"asset class"

in relation to—

which specialised lending exposures and purchased corporate receivables shall separately be reported;

 

"associate"

in relation to a bank's trading activities means an associate as defined in section 37(7) of the Act;

 

“automatic option risk”

in relation to interest rate risk in the banking book means the risk that arises from—

[Definition inserted by section 5(a) of Notice No. 2900, GG47789, dated 23 December 2022- Effective 1 January 2023]

 

"Basel II"

means the framework issued by the Basel Committee on Banking Supervision that essentially consists of the comprehensive version of the International Convergence of Capital Measurement and Capital Standards: A Revised Framework1,   issued on 30 June 2006, which is a compilation of the following documents issued by the Basel Committee on Banking Supervision:

(a)        the June 2004 Basel II Framework; 2

(b)        the elements of the 1988 Accord that were not revised during the Basel II process;3

(c)        the 1996 Amendment to the Capital Accord to Incorporate Market Risks; 4

(d)        the 2005 paper on the Application of Basel II to Trading Activities and the Treatment of Double Default Effects; 5

[Definition inserted by regulation 40(a) of Notice No. 297, GG 40002, dated 20 May 2016]

 

"Basel 2.5"

means the framework issued by the Basel Committee on Banking Supervision that essentially includes the following documents issued by the Basel Committee on Banking Supervision:

[Definition inserted by regulation 40(b) of Notice No. 297, GG 40002, dated 20 May 2016]

 

"Basel III"

means the framework issued by the Basel Committee on Banking Supervision that essentially consists of the following two documents issued by the Basel Committee on Banking Supervision:

[Definition inserted by regulation 40(c) of Notice No. 297, GG 40002, dated 20 May 2016]

 

“basis risk”

in relation to interest rate risk in the banking book means the risk that arises from—

[Definition inserted by section 5(b) of Notice No. 2900, GG47789, dated 23 December 2022- Effective 1 January 2023]

 

"basis transaction"

in relation to the standardised approach for the measurement of a bank’s exposure to counterparty credit risk means a non-foreign-exchange transaction, that is, both legs of the relevant transaction are denominated in the same currency, in respect of which the cash flows of both legs depend on different risk factors from the same asset class, which transactions may include, for example, interest rate basis swaps in respect of which payments based on two distinct floating interest rates are exchanged or commodity spread trades in respect of which payments based on prices of two related commodities are exchanged;

[Definition inserted by section 11(a) of Notice No. 1427, GG44048, dated 31 December 2020 - effective 1 January 2021]

 

“behavioural option risk”

in relation to interest rate risk in the banking book means the risk that arises from flexibility embedded implicitly or otherwise within the terms of financial contracts, such that a change in interest rates may effect a change in the behaviour of the bank’s clients, such as, for example, the right of borrowers to prepay their loans earlier, with or without penalty, or the right of depositors to withdraw their deposits earlier, in search of a higher yield;

[Definition inserted by section 5(c) of Notice No. 2900, GG47789, dated 23 December 2022- Effective 1 January 2023]

 

"business day"

for the purposes of these Regulations, unless otherwise stated or directed by the Registrar, means each day of the week except Saturday, Sunday or a public holiday;

 

"cash-management scheme"

means an agreement between a bank and such of its clients as are members of the same group of companies in respect of which group annual financial statements are required to be completed in terms of the provisions of section 288(1) of the Companies Act, which agreement provides for transfers of balances between such clients' accounts kept in the accounting records of the bank, and which transfers are made in order to minimise the interest expense or to maximise the interest income of such clients;

 

"central counterparty"

in relation to a bank's exposure to counterparty credit risk means an entity or a person that acts as an intermediary between counterparties to contracts traded in one or more financial markets, which entity or person or intermediary—

 

"central government"

means all relevant—

 

"clearing member"

in relation to counterparty credit risk means a member of, or a direct participant in, a central counterparty that is entitled to enter into a transaction with the relevant central counterparty, irrespective whether or not the relevant transactions with the central counterparty are for the member's own hedging, investment or speculative purposes, or whether it also enters into trades as a financial intermediary between the relevant central counterparty and other market participants, provided that—

 

"client"

in relation to counterparty credit risk includes a party to a transaction with a central counterparty, either through a clearing member acting as a financial intermediary or a clearing member guaranteeing the performance of the client to the central counterparty;

 

"commercial paper"

means—

issued to acquire working capital; and

but does not include bankers' acceptances;

 

"committed undrawn facility or loan commitment"

in relation to a bank's off-balance sheet exposure includes any irrevocable undrawn commitment or facility;

 

"commodity"

in relation to a bank's exposure to market risk means a physical product that is or may be traded in a secondary market, such as agricultural products, minerals that may include oil, and precious metals;

 

"connected persons"

in relation to a bank's trading activities means two or more persons—

which persons—

irrespective whether or not any of the said persons are domiciled in the same country as the other or others;

 

"corporate exposure"

in relation to the IRB approach includes a debt obligation of a corporation, partnership or proprietorship;

 

"Corporation for Public Deposits"

in relation to the institutional and maturity breakdown of liabilities and assets means the subsidiary of the Reserve Bank, which subsidiary is a public–sector financial institution authorized in terms of the Corporation for Public Deposits Act, 1984 (Act No 46 of 1984) to accept call deposits from public-sector institutions and to invest such funds in short-term money-market instruments and in Treasury bills;

 

"correlation trading portfolio"

in relation to the measurement of a bank's exposure to market risk—

Provided that a bank may also include in its correlation trading portfolio any position that hedges a position described hereinbefore, and which is neither a securitization exposure nor n-th-to-default credit derivative instrument, and in respect of which a liquid two-way market exists, as described hereinbefore, for the instrument or its underlying;

 

"counterparty credit risk"

includes any exposure to credit risk arising from a bilateral contract, transaction or agreement—

irrespective whether or not the reporting bank entered into the contract, transaction or agreement in order to obtain short-term financing, obtained collateral to mitigate its exposure to credit risk or entered into any netting, re-margining or set-off contract;

 

"CPSS -TOSCO Principles for Financial Market Infrastructures"

means the Principles for Financial Market Infrastructures issued from time to time by the Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organization of Securities Commissions (IOSCO);

 

"credit-default swap"

means a bilateral agreement between a protection buyer and a protection seller in terms of which agreement the protection buyer agrees to pay the protection seller an agreed premium or fee. The protection seller agrees to pay the protection buyer a credit-default amount only if a predefined credit event occurs;

 

"credit-derivative instrument"

means any contract in terms of which the credit risk associated with a financial asset is isolated from the other risks associated with that financial asset and which credit risk is transferred, either explicitly or implicitly, from one person or counterparty, which can be referred to as the protection buyer or credit-risk seller, to another person or counterparty, which can be referred to as the protection seller or buyer of credit risk;

 

"credit-enhancing interest-only strip"

means an asset that—

 

"credit event"

means any contingent event relating to a reference asset, reference entity or underlying asset agreed between the counterparties to a credit-derivative instrument, upon the occurrence of which event the protection buyer becomes entitled to payment;

 

"credit-linked note"

means a bilateral agreement between a protection buyer and a protection seller in terms of which agreement the protection seller invests in a note issued by the protection buyer, which note is referenced to a particular credit exposure. The protection seller assumes the credit risk of the referenced exposure or underlying exposure. The protection buyer pays the protection seller agreed interest on the note issued and redeems the note at par value on the maturity date if a predefined credit event did not occur;

 

“credit spread risk in the banking book”

is a risk related to interest rate risk in the banking book, that includes any type of asset/ liability spread risk of instruments with inherent credit risk related characteristic that is not fully explained by interest rate risk in the banking book or by the relevant expected credit/jump to default risk;

[Definition inserted by section 5(d) of Notice No. 2900, GG47789, dated 23 December 2022- Effective 1 January 2023]

 

"credit valuation adjustment"

in relation to a bank's exposure to counterparty credit risk means an adjustment to the mid-market valuation of a portfolio of trades with a particular counterparty, which adjustment—

 

"cross-product netting"

in relation to a bank's exposure to counterparty credit risk means the inclusion of transactions of different product categories within the same netting set in accordance with the relevant requirements relating to cross-product netting specified in these Regulations;

 

"current exposure"

in relation to a bank's exposure to counterparty credit risk means the higher amount of—

 

The terms current exposure and replacement cost are often used interchangeably by market participants;

 

"current market value"

in relation to a bank's exposure to counterparty credit risk means the net market value of a portfolio of transactions within a netting set with a particular counterparty, which net market value may include positive and negative market values relating to individual transactions included in the said netting set or portfolio of transactions;

 

"default"

in relation to the IRB approach for the measurement of a bank's exposure to credit risk shall in the case of—

 

"default fund"

in relation to counterparty credit risk includes all clearing members' funded or unfunded contributions towards or underwriting of a central counterparty's mutualised losssharing arrangements—

which contributions are sometimes being referred to as clearing deposits or guaranty fund contributions;

 

"demand deposit"

means any amount repayable on demand, and includes—

 

"distribution of exposures"

in relation to a bank's exposure to counterparty credit risk means the process of forecasting the probability distribution of market values of transactions, during which process of forecasting instances of negative net market values are set equal to zero in order to recognise that when the reporting bank owes money to a particular counterparty, the bank does not have an exposure to the said counterparty;

 

"distribution of market values"

in relation to a bank's exposure to counterparty credit risk means the process of forecasting the probability distribution of the net market values of transactions within a netting set for a particular forecasting horizon, which process of forecasting is based on the realised market value of the said transactions up to the time of forecasting;

 

"doubtful category"

in relation to the standardised approach for the measurement of a bank's exposure to credit risk means on or off-balance sheet items that exhibit all the weaknesses inherent in on-balance sheet or off-balance sheet items classified as substandard, with the added characteristic that the on-balance sheet or off-balance sheet items are not adequately secured;

 

"EAD amount"

in relation to the IRB approach for on-balance sheet and off-balance sheet credit exposure means the expected aggregate gross exposure of a facility upon the default of an obligor, as may be specified in these Regulations;

 

"economic loss"

in relation to the IRB approach includes all material discounts and material direct and indirect costs associated with the collection of an exposure in default;

 

"effective expected exposure"

at a specific date and in relation to a bank's exposure to counterparty credit risk means—

that is, effective expected exposure means the expected exposure constrained to be non-decreasing over time;

 

"effective expected positive exposure"

in relation to a bank's exposure to counterparty credit risk means the weighted average over time of effective expected exposure over the first year or over the time period of the contract with the longest maturity included in the relevant netting set, in respect of which the relevant weights shall be based on the proportion that an individual expected exposure amount represents of the entire time interval;

 

"effective maturity"

in relation to the internal model method for the measurement of a bank's exposure to counterparty credit risk and relating to a netting set with a maturity of more than one year means the ratio of the sum of expected exposure over the life of the transactions included in the netting set and discounted at the risk-free rate of return, divided by the sum of expected exposure over one year in a netting set discounted at the risk-free rate provided that the effective maturity may be adjusted to reflect rollover risk by replacing the expected exposure amount with the effective expected exposure amount in respect of a forecasting horizon of less than one year;

 

"eligible institution"

means an external credit assessment institution or an export credit agency that meets the prescribed minimum requirements specified in these Regulations and which institution/agency is recognised as an eligible institution for purposes of determining the required capital and reserve funds of a bank;

 

"eligible provisions"

in relation to a bank that adopted the IRB approach for the measurement of the bank’s exposure to credit risk means the sum of all credit impairments, allowances or reserves for impairment, including—

which impairment, allowance, reserve or discount relates to exposures calculated in terms of the IRB approach, but do not include any specific impairments relating to equity exposures or securitisation exposures, including any underlying assets still held on the balance sheet of the originator. General allowances on underlying securitised exposures are not to be taken into account in any calculation;

[Definition substituted by section 6(a) of Notice No. 2561, GG46996, dated 30 September 2022 - effective 1 October 2022]

 

"excluded instruments, liabilities or claims"

in relation to a bank or controlling company's TLAC means any instrument, liability or claim specified in writing by the Authority or Reserve Bank to be excluded from the bank or controlling company's relevant TLAC calculation;

[Definition inserted by section 10(a) of Notice No. 943, GG46159, dated 31 March 2022 : effective 1 April 2022]

 

"exemption notice relating to securitisation schemes"

means Government Notice No. 2, published in Government Gazette No. 30628, dated 1 January 2008, as amended from time to time;

 

"expected exposure"

in relation to a bank's exposure to counterparty credit risk means the mean or average of the distribution of exposures at any particular future date before the transaction with the longest maturity in the particular netting set matures, which expected exposure amount is typically generated in respect of many future dates up until the longest maturity date of transactions included in the relevant netting set;

 

"expected positive exposure"

in relation to a bank's exposure to counterparty credit risk means the weighted average over time of expected exposure and in respect of which the relevant weights are based on the proportion that an individual expected exposure amount represents of the entire time interval, which average shall for purposes of calculating a bank's minimum required capital and reserve funds be calculated over the first year or over the time period of the contract with the longest maturity included in the particular netting set;

 

"financial asset"

in relation to a bank's trading activities means—

 

"financial corporate sector"

in relation to the institutional and maturity breakdown of liabilities and assets includes public and private sector companies, including an insurer, a pension fund, a medical scheme, a financial intermediary such as a unit trust, a micro lenders, the Development Bank of Southern Africa, the Industrial Development Corporation and any broker;

 

"financial instrument"

in relation to a bank's trading book, portfolio or activities means any instrument or contract that gives rise to—

which instruments or contracts include primary instruments or cash instruments, and derivative instruments, including—

but not any other deposit or loan;

 

"financial liability"

in relation to a bank's trading activities means an obligation—

 

"Financial Reporting Standards"

means such reporting standards as may be issued from time to time by the Financial Reporting Standards Council in terms of the relevant provisions of section 440 of the Companies Act, 1973, or section 29 read with section 203 of the Companies Act, 2008;

 

"foreign asset"

means any asset (excluding a claim) situated outside the Republic, and any asset consisting of a claim on a non-resident by the reporting bank;

 

"foreign currency"

means a currency other than the reporting currency of a bank, branch or controlling company;

 

"foreign sector"

in relation to the institutional and maturity breakdown of liabilities and assets means any natural or juristic person who is not a permanent resident of the Republic of South Africa;

 

"fund manager"

in relation to the institutional and maturity breakdown of liabilities and assets means an institution approved under the Financial Advisory and Intermediary Services Act, Act no. 37 of 2002, as amended, to carry on the business of managing funds on behalf of others, which institution may be referred to as a fund manager, portfolio manager or asset manager;

 

"funded credit-derivative instrument"

means a credit-derivative contract in terms of which a protection seller provides collateral to a protection buyer for the settlement of the protection seller's potential future obligations;

 

“gap risk”

in relation to interest rate risk in the banking book means the risk that arises from—

[Definition inserted by section 5(e) of Notice No. 2900, GG47789, dated 23 December 2022- Effective 1 January 2023]

 

"general allowance or reserve"

in relation to doubtful debts means any provision or reserve created to absorb future losses on debts that may prove to be wholly or partly irrecoverable and which losses have not been separately identified, but which losses can reasonably be expected to exist or develop;

 

"general risk"

in relation to a bank's trading activities means the risk of an adverse price change in the underlying instrument owing to—

 

"general wrong-way risk"

in relation to a bank's exposure to counterparty credit risk means the probability of default of a particular counterparty is positively correlated with general market risk factors;

 

"hedge"

means a position in a financial instrument that materially or entirely offsets the component risk elements of another position or portfolio;

 

"hedging set"

in relation to the standardised approach for the measurement of a bank’s exposure to counterparty credit risk and the calculation of the add-on for each relevant asset class means a set of transactions within a single netting set within which partial or full offsetting is permitted for the purpose of calculating the relevant required potential future exposure add-on amount;

[Definition substituted by section 11(b) of Notice No. 1427, GG44048, dated 31 December 2020 - effective 1 January 2021]

 

"higher-level client"

in relation to the calculation of the relevant exposure to a central counterparty in a multi-level client structure means the institution that provides clearing services;

[Definition inserted by section 11(c) of Notice No. 1427, GG44048, dated 31 December 2020 - effective 1 January 2021]

 

"holding of a financial instrument"

in relation to a bank's trading activities means the holding of a financial instrument by a bank—

 

"household"

in relation to the institutional and maturity breakdown of liabilities and assets means an individual or small group of individuals sharing the same living accommodation, pooling some or all of their income and wealth and collectively consuming goods and services;

 

"household sector"

in relation to the institutional and maturity breakdown of liabilities and assets includes households, unincorporated business enterprises of households, non-profit institutions serving households, private trusts and friendly societies;

 

"initial margin"

in relation to counterparty credit risk arising from exposure to—

[Definition substituted by section 15(a) of Notice No. 724, GG44003, dated 18 December 2020 - effective 1 January 2021]

 

"instalment sale transaction"

means a transaction in terms of which—

 

"Institutional Sector Classification Guide"

means the Institutional Sector Classification Guide for South Africa, issued from time to time by the Economic Research and Statistics Department of the Reserve Bank;

[Definition substituted by regulation 40(d) of Notice No. 297, GG 40002, dated 20 May 2016]

 

"insurer"

in relation to the institutional and maturity breakdown of liabilities and assets means any privately or publicly incorporated mutual or other entity established in terms of the Insurance Act, 2017 (Act No 18 of 2017) read with the Long-term Insurance Act, 1998 (Act No 52 of 1998) or the Short-term Insurance Act, 1998 (Act No 53 of 1998), the principal function of which is to provide life, accident, fire or other forms of insurance to individual institutional units or groups of units;

[Definition substituted by section 5(f) of Notice No. 2900, GG47789, dated 23 December 2022- Effective 1 January 2023]

 

“interest rate risk in the banking book”

means the current or prospective risk to a bank’s capital and reserve funds and/ or earnings arising from adverse movements in interest rates affecting the bank’s banking book positions—

[Definition inserted by section 5(g) of Notice No. 2900, GG47789, dated 23 December 2022- Effective 1 January 2023]

 

"investor's interest"

in relation to the calculation of a bank or other relevant institution's risk exposure relating to revolving assets in terms of the IRB approach means the investors' drawn balances related to the securitisation exposures plus the EAD amounts associated with the investors' undrawn facilities, which EAD amounts shall in respect of the undrawn balances of the securitised exposures be calculated by allocating the undrawn facilities between the seller's and investors' interests on a pro rata basis, that is, based on the proportions of the seller's and investors' shares of the securitised drawn balances;

 

"IRB approach"

means the internal ratings-based approach in terms of which a bank may calculate its exposure to credit risk;

 

"irrevocable undrawn commitment or facility"

in relation to a bank's off-balance sheet exposure includes any commitment or facility in respect of which the bank is legally committed to honour any drawdown or obligation arising from the said commitment or facility, and the said obligation of the bank in respect of the said commitment or facility may not be cancelled or amended by the bank—

 

"ISO code"

in relation to selected locational statistics means the relevant country codes issued from time to time by the International Organization for Standardisation;

 

"leasing transaction"

means a transaction in terms of which a lessor leases movable goods to a lessee against payment, by the lessee to the lessor, of a stated or determinable sum of money at a stated or determinable future date or in whole or in part in instalments over a period in the future, but does not include a transaction by which it is agreed at the time of the conclusion thereof that the debtor or any person on behalf of the debtor shall at any stage during or after the expiry of the lease or after the termination of that transaction become the owner of those goods or after such expiry or termination retain possession or use or enjoyment of those goods;

 

"lending related guarantee"

in relation to a bank's off-balance sheet exposure includes any undertaking issued by a bank on behalf of a person in respect of which undertaking the said bank will be liable for a specific financial obligation of the person in respect of which the undertaking was issued in the event that the said person does not fulfill that person's specified financial obligation at the due date;

 

"leverage"

in relation to a bank’s equity investments in all types of funds held in the bank’s banking book means—

[Definition inserted by section 11(d) of Notice No. 1427, GG44048, dated 31 December 2020 - effective 1 January 2021]

 

"LGD ratio"

in relation to the IRB approach means the loss suffered by a bank following the default of a particular obligor, expressed as a percentage of the relevant obligation;

 

"liability to non-resident"

means any claim of a non-resident on a South African bank;

 

"liabilities to the public"

means all liabilities of a reporting bank, whether domestic or foreign, arising from the operations of the reporting bank in connection with its banking business in the Republic, as set out in more detail in the forms BA 100 and BA 900

 

"long position"

in relation to a bank's trading activities means the position when a person has bought a financial instrument in order to establish a market position and such market position has not yet been closed out by means of an offsetting sale;

 

"long settlement trade transaction"

includes any transaction in respect of which a counterparty undertakes to deliver a security, commodity, or foreign exchange amount against cash, other financial instruments, or commodities, or vice versa, at a settlement or delivery date that is contractually specified as more than the lower of the market standard for the particular instrument and five business days after the date on which the reporting bank entered into the transaction, which transaction, for purposes of these Regulations, shall be treated as a forward contract up to the settlement date;

 

"long-term liability"

in relation to any date, means a liability (including a loan from or a deposit by another bank) that is payable after the expiration of more than six calendar months as from that date or that on that date is subject to notice that makes it payable after the expiration of more than six calendar months as from that date;

 

"loss"

in relation to the LGD ratio of any asset class specified in the IRB approach means economic loss, which loss amount/ratio shall include material discounts and material direct and indirect costs associated with the collection of amounts due;

 

"loss category"

in relation to the standardised approach for the measurement of a bank's exposure to credit risk means on-balance sheet or off-balance sheet items that are considered uncollectible and of such little value that the said items should no longer be included in the net assets of the bank or branch;

 

"lower-level client"

in relation to the calculation of the relevant exposure to a central counterparty in a multi-level client structure means an institution that does clearing through a client that provides clearing services;

[Definition inserted by section 11(e) of Notice No. 1427, GG44048, dated 31 December 2020 - effective 1 January 2021]

 

"margin agreement"

in relation to counterparty credit risk means any contractual agreement or provision to a contractual agreement in terms of which agreement or provision one counterparty has to provide collateral to the second counterparty when an exposure of the said second counterparty to the said first counterparty exceeds a specified amount;

 

"margin lending transaction"

includes any transaction in terms of which a bank extends credit in connection with the purchase, sale, carrying or trading of securities, which credit amount is collateralised by securities, the value of which collateral exceeds the amount of the loan, but does not include any other loan granted by the bank in the ordinary course of business and in respect of which loan the bank obtained collateral as security for the repayment of the loan;

 

"margin period of risk"

in relation to counterparty credit risk means the time period commencing on the date on which collateral in respect of a netting set of transactions with a defaulting counterparty was last exchanged until the date on which the said counterparty is closed out and the resulting market risk re-hedged;

 

"margin threshold"

in relation to counterparty credit risk means the largest amount of an exposure that remains outstanding before one party to the bilateral agreement has the right to call for collateral;

 

"market risk"

means the risk of loss in on-balance sheet and off-balance sheet positions arising from movements in market prices;

 

"market value"

in relation to a bank's trading activities means the amount obtainable from the sale, or payable on acquisition, of a financial instrument in the market;

 

"medium-term liability"

in relation to any date, unless specifically otherwise stated, means a liability (including a loan from or a deposit by another bank) that is payable on or after the thirty-second day as from that date but not later than the day on which a period of six calendar months as from that date expires, or that on that date is subject to notice that makes it payable on or after the thirty-second day as from that date but not later than the day on which a period of six calendar months as from that date expires;

 

"mortgage loan or advance"

in relation to the institutional and maturity breakdown of liabilities and assets means any loan or advance granted by the reporting bank to a person, which loan or advance is repaid by the obligor in whole or in part in instalments during a specified period in the future and in terms of which loan or advance a mortgage bond in respect of a specified property is registered in favour of the reporting bank, which mortgage bond serves as collateral in respect of the loan or advance to be repaid by the obligor during the said specified period in the future;

 

"multi-level client structure"

in relation to counterparty credit risk means a structure in terms of which a bank may centrally clear as an indirect client, that is, clearing services are provided to the bank by an institution or a person that is not a direct clearing member, but is itself a client of a clearing member or another clearing client, provided that for purposes of these Regulations, in relation to exposures between clients and clients of clients, the term “higher level client” and the term “lower level client” shall bear the meaning as defined hereinbefore;

[Definition inserted by section 11(f) of Notice No. 1427, GG44048, dated 31 December 2020 - effective 1 January 2021]

 

"mutual bank"

means a juristic person that is registered as a mutual bank in terms of the Mutual Banks Act, 1993, (Act No. 124 of 1993);

 

"negotiable certificate of deposit"

means any fixed-deposit receipt issued by the reporting bank, which certificate of deposit is transferable and negotiable as a financial asset in the secondary market, and in terms of which certificate of deposit the issuer bank undertakes to pay to the holder of the certificate, on the maturity date of the said instrument, the amount of the said deposit plus any interest amount due in respect of the deposit;

 

"net market value"

in relation to a bank's trading activities means the aggregated market value of all relevant long and short positions in a particular category of financial instruments;

 

"net position"

in relation to a relevant specified instrument held in a bank's trading book or banking book, unless expressly stated otherwise, means the excess amount of a bank's long/short positions over the bank's short/long positions in respect of the said specific instrument;

 

"netting"

in relation to a bank's trading activities means the process whereby—

in order to ascertain the net position of the person in question;

 

"netting set"

in relation to a bank's exposure to counterparty credit risk means a group of transactions concluded with a single counterparty and which group of transactions is subject to a legally enforceable bilateral netting agreement that complies with the relevant requirements specified in these Regulations provided that each transaction that exposes the bank to counterparty credit risk but which transaction is not subject to a legally enforceable bilateral netting agreement as envisaged hereinbefore shall for purposes of these Regulations be deemed to represent a netting set on its own;

 

"non-earning asset"

includes an investment in shares in respect of which no dividends have been received during the twelve-month period preceding the date of a return that is to be submitted in accordance with these Regulations;

 

"non-financial instrument"

in relation to a bank's trading activities means an instrument that does not constitute a financial instrument, such as a loan, deposit or mortgage advance;

 

"non-performing debt"

means discounts, loans or advances in respect of which it is no longer prudent to credit interest receivable to the income statement;

 

"non-profit institution serving households"

in relation to the institutional and maturity breakdown of liabilities and assets means any legal or social entity providing goods and services to households free of charge or at economically insignificant prices, which institutions are neither controlled nor primarily financed by government, including any welfare organisation, any aid society, any club, any non-profit hospital or school, any church, any trade union, any stokvel, any political party or company registered in terms of section 21 of the Companies Act;

 

"non-resident"

means a person who is not a resident;

 

"offsetting transaction"

in relation to counterparty credit risk means the transaction leg between a clearing member and a central counterparty when the clearing member acts on behalf of a client, such as, for example, when a clearing member clears or novates a client's trade;

 

"one-sided credit valuation adjustment"

in relation to a bank's exposure to counterparty credit risk means a credit valuation adjustment that—

 

"operational risk"

means the risk of loss resulting from inadequate or failed internal processes, people or systems or from external events, including legal risk such as exposure to fines, penalties, or punitive damages resulting from supervisory actions and private settlements, but does not include strategic or reputational risk;

 

“option risk”

in relation to interest rate risk in the banking book—

[Definition inserted by section 5(h) of Notice No. 2900, GG47789, dated 23 December 2022- Effective 1 January 2023]

 

"other capital market transaction"

in relation to a bank's exposure to counterparty credit risk includes—

 

"other public-sector bodies"

include—

but do not include any local government, municipality, local government unit or local government enterprise;

 

"other TLAC instrument or liability"

(b)        excludes any instrument, liability or claim specified in writing by the Authority or Reserve Bank to fonm part of "excluded instruments, liabilities or claims

[Definition inserted by section 10(b) of Notice No. 943, GG46159, dated 31 March 2022 : effective 1 April 2022]

 

"overdue amount"

in relation to—

 

"particular instrument"

in relation to a bank's trading activities means an interest-rate future, forward rate agreement or forward commitment to buy or sell loan stock;

 

"past due amount"

shall bear the same meaning as an overdue amount, which terms are often used interchangeably by market participants;

 

"peak exposure"

in relation to a bank's exposure to counterparty credit risk means a high percentile, such as 95 percent or 99 percent, of the distribution of exposures at any particular future date before the maturity date of the transaction with the longest maturity included in the particular netting set, which peak exposure amount is typically generated for many future dates up until the longest maturity date of transactions included in the relevant netting set;

 

"pension or provident fund"

in relation to the institutional and maturity breakdown of liabilities and assets includes any autonomous private or public entity that provides retirement benefits;

 

"performance related guarantee"

in relation to a bank's off-balance-sheet exposure includes—

 

"person"

[Definition deleted by section 10(c) of Notice No. 943, GG46159, dated 31 March 2022 : effective 1 April 2022]

 

"potential future exposure"

in relation to a bank's exposure to counterparty credit risk means the maximum exposure amount estimated to occur on a future date, which exposure amount is estimated at a high level of statistical confidence;

 

"private non-financial corporate sector"

in relation to the institutional and maturity breakdown of liabilities and assets includes any company primarily engaged in the production of market goods and non-financial services at economically significant prices with the intent to generate profit or financial gain for its shareholders, including any nominee company, any non-profit institution serving the non-financial corporate sector, co-operatives, close corporations and any other private sector company registered in terms of the Companies Act;

 

"private-sector non-bank person"

[Definition inserted by section 10(c) of Notice No. 943, GG46159, dated 31 March 2022 : effective 1 April 2022];

 

"private trusts"

in relation to the institutional and maturity breakdown of liabilities and assets means assets of individuals or estates, administered by, among others, banks, trust companies or attorneys on behalf of the said individuals or estates

[Definition inserted by regulation 40(e) of Notice No. 297, GG 40002, dated 20 May 2016]

 

"promissory note"

means any unconditional order issued in writing by one person to another, in terms of which note the issuer undertakes to pay on demand or at a fixed or determinable future date a specified amount of money to a specified person or the order of a specified person, or to the bearer of the said promissory note;

 

"protection buyer"

means a counterparty that transfers the credit risk associated with a reference asset, reference entity or underlying asset to a protection seller, irrespective of whether or not the protection buyer owns the reference asset or underlying asset;

 

"protection seller"

means a counterparty that assumes credit risk associated with a reference asset, reference entity or underlying asset;

 

"public financial corporate sector"

in relation to the institutional and maturity breakdown of liabilities and assets includes all institutional units owned or controlled by institutional units in the general government sector;

 

"Public Investment Corporation"

in relation to the institutional and maturity breakdown of liabilities and assets means the corporation conducting business in terms of the Financial Advisory and Intermediary Services Act, 2002 (Act No 37 of 2002) and the Public Finance Management Act, which corporation invests funds on behalf of public sector entities such as the Government Employees Pension Fund;

 

"public non-financial corporate sector"

in relation to the institutional and maturity breakdown of liabilities and assets includes institutional units owned or controlled by units in the general government sector, such as ESKOM, Telkom, Transnet and the SABC, the principal activity of which units or corporations is the production of market goods or the provision of non-financial services;

 

"public sector"

unless specifically otherwise stated, means the central government and other public-sector bodies, as hereinbefore in this regulation defined;

 

"qualifying central counterparty"

means an entity or a person—

[Definition substituted by section 11(g) of Notice No. 1427, GG44048, dated 31 December 2020 - effective 1 January 2021]

 

"rating system"

in relation to the IRB approach includes all methods, processes, controls, data collection and information-technology systems that support the assessment of credit risk, the assignment of internal risk ratings, and the quantification of default and loss estimates;

 

"realisable value"

in relation to a bank's trading activities means a fair estimate of the market value at which a position could be sold without unduly affecting the market price of the instrument;

 

"reference asset"

means a financial asset in respect of which payments in terms of a credit-derivative contract or instrument are linked, which reference asset may be a bond or a security, but it may also be a loan or another form of obligation, irrespective whether or not the said asset is held by a protection buyer;

 

"reference entity"

means a legal entity, the associated credit risk of which is transferred by means of a credit-derivative transaction. In the case of a multiple-name product, the reference entity is not a single legal entity, but a basket or portfolio of reference entities;

 

"repossessed"

asset, object or property, unless specifically otherwise provided in these Regulations or specified in writing by the Registrar, includes the taking back, or taking over control, by a bank of any moveable or immovable asset, object or property that was either used as collateral or rented or leased in terms of a purchase or credit contract, or a similar agreement or transaction, concluded between the bank and any other person, that is—

shall be included in the bank's relevant category of repossessed assets, objects or property;

 

"repo-style transaction"

includes—

 

"repurchase agreement or transaction"

includes any transaction subject to further commitment in terms of which transaction or agreement money is obtained from a person, which money shall for the purposes of these Regulations be deemed to have been so obtained by way of a loan, through the sale of an asset to any other person subject to an agreement in terms of which the seller undertakes to purchase from the buyer, at a future date, the asset so sold or any other asset issued by the issuer of, and which has been so issued subject to the same conditions regarding term, interest rate and price as, the asset so sold, irrespective whether or not the transaction or agreement is being referred to as a securities lending transaction, an outward carry transaction, a sell-buy-back transaction or any other market term that may be used from time to time;

 

"reputational risk"

for the purposes of these Regulations, unless specifically otherwise stated or directed by the Registrar, means the risk arising from the negative perception of customers, counterparties, shareholders, investors, debt-holders, market analysts, regulators or other relevant persons or stakeholders, that may adversely affect a bank's ability to maintain existing, or establish new, business relationships and continued access to sources of funding, such as the interbank or securitisation market, which risk—

 

"resale agreement or transaction"

includes any transaction subject to further commitment in terms of which transaction or agreement money is provided to a person, which money shall for the purposes of these Regulations be deemed to have been so provided in the form of a loan, through the purchase of an asset from any other person subject to an agreement in terms of which the buyer undertakes to sell to the seller, at a future date, the asset so purchased or any other asset issued by the issuer of, and which has been so issued subject to the same conditions regarding term, interest rate and price as, the asset so purchased, irrespective whether or not the transaction or agreement is being referred to as a securities borrowing transaction, an inward carry transaction, a buy-sell-back transaction or any other market term that may be used from time to time;

 

"resecuritisation exposure"

is a securitisation exposure in which the risk associated with an underlying pool of exposures is tranched and at least one of the underlying exposures is a securitisation exposure. In addition, an exposure to one or more resecuritisation exposures is a resecuritisation exposure. A resecuritsation exposure can for example include, amongst other things,—

but does not include an exposure resulting from the retranching of a securitisation exposure if the bank is able to demonstrate that the cash flows to and from the bank could be replicated in all circumstances and conditions by an exposure to the securitisation of a pool of assets that contains no securitisation exposures.

[Definition substituted by section 6(b) of Notice No. 2561, GG46996, dated 30 September 2022 - effective 1 October 2022]

 

"resident"

means—

but does not include any citizen of another country attached to a foreign diplomatic or military mission or representative office in the Republic;

 

"residual maturity"

means the remaining period to the maturity of a contract;

 

"restructured credit exposure"

in relation to a bank's exposure to credit risk includes any loan, advance or facility in respect of which the bank granted a concession to the obligor owing to a deterioration in the obligor's financial condition, that is, owing to a financial distressed situation of the relevant obligor,

provided that no loan, advance, increased credit limit or facility extended or renewed by the reporting bank in its ordinary course of business at a stated interest rate or on terms or conditions equivalent to the current interest rate or terms or conditions for new debt with similar risk shall constitute a restructured loan or credit exposure for purposes of these Regulations;

 

"revocable undrawn commitment or facility"

in relation to a bank's off-balance sheet exposure includes any commitment, facility or obligation that, at any time and at the sole discretion of the reporting bank, is revocable and unconditionally cancellable by the bank without the bank incurring any cost or penalty;

 

"risk-neutral distribution"

in relation to a bank's exposure to counterparty credit risk means the distribution of market values or exposures in respect of a particular future time period, which distribution is calculated based on market implied values such as implied volatilities;

 

"risk position"

in relation to the standardised method for the measurement of a bank's exposure to counterparty credit risk means the risk amount assigned to a particular transaction in accordance with the relevant directives specified in these Regulations, which risk amount is derived from a specific algorithm;

 

"rollover risk"

in relation to a bank's exposure to counterparty credit risk means the amount by which the expected positive exposure amount is understated due to ongoing future transactions expected to be concluded with a particular counterparty, which additional exposure amounts relating to the said ongoing future transactions are not included in the calculation of the said expected positive exposure amount;

 

"securities financing transaction"

in relation to a bank's exposure to counterparty credit risk includes—

the value of which agreement or transaction depends on market valuations from time to time and which agreement or transaction may be subject to a margin agreement;

 

"securitisation exposure"

in relation to a securitisation scheme includes—

 

"short position"

in relation to a bank's trading activities means the position when a person sold a financial instrument in order to establish a market position and such market position has not been closed out by means of a matching purchase;

 

"short-term liability"

in relation to any date, unless specifically otherwise stated, means a liability (including a loan from or a deposit by another bank) that is payable on or before the thirty-first day as from that date, or that on that date is subject to notice that makes it payable on or before the thirty-first day as from that date;

 

"social security fund"

in relation to the institutional and maturity breakdown of liabilities and assets means any autonomous fund that manages and operates a social security scheme;

 

"special-mention category"

in relation to the standardised approach for the measurement of a bank's exposure to credit risk means on-balance-sheet or off-balance-sheet items that are subject to conditions that, if left uncorrected, could raise concerns about timely and full repayment of the principal amount and related interest or other income and, as such, require more than normal attention;

 

"special-purpose entity, -institution or -vehicle"

means a company or trust, insolvency remote, incorporated, created or used solely for the purpose of the implementation and operation of a traditional or synthetic securitisation scheme, as envisaged in the exemption notice relating to securitisation schemes;

 

"specific impairment or allowance for doubtful debt"

means any impairment, allowance or provision made against losses on a debt that has been specifically identified as bad or doubtful, and any impairment, allowance or provision made against groups of debt on the basis of their age;

 

"specific impairment or allowance in respect of investments"

means any impairment, allowance or provision made in respect of the anticipated or actual diminution in the value of securities or equities held by the reporting bank or branch;

 

"specific risk"

in relation to a bank's trading activities means the risk of loss due to an adverse price movement in an underlying instrument owing to factors related to the issuer of the instrument or in the case of a derivative instrument the issuer of the underlying instrument, which risk includes idiosyncratic risk and event or default risk;

 

"specific wrong-way risk"

in relation to a bank's exposure to counterparty credit risk means an exposure to a particular counterparty is positively correlated with the probability of default of the said counterparty due to transactions concluded with the said counterparty;

 

"standard or current category"

in relation to the standardised approach for the measurement of a bank's exposure to credit risk means on-balance sheet and off-balance sheet items that are fully current in terms of both the repayment of the principal amount and related interest or other income, the continued repayment of which are without doubt and for which full repayment is expected;

 

"stock position"

in relation to a bank's trading activities includes—

 

"substandard category"

in relation to the standardised approach for the measurement of a bank's exposure to credit risk means on-balance sheet or off-balance sheet items that show weaknesses that could lead to probable loss if not corrected or where full repayment is in doubt owing to the primary sources of repayment being insufficient;

 

"suspensive sale transaction"

means a sale subject to a suspensive condition;

 

"TLAC"

means total loss-absorbing capacity;

[Definition inserted by section 10(e) of Notice No. 943, GG46159, dated 31 March 2022 : effective 1 April 2022]

 

"total-return swap"

means a bilateral agreement between a protection buyer and a protection seller in terms of which agreement the protection buyer swaps the total return on a reference asset or underlying asset, including all contractual payments and any appreciation in the value of the reference asset or underlying asset, with the protection seller in exchange for payment of a variable or fixed reference interest and compensation for losses in the value of the reference asset or underlying asset.

 

The terms total-return swap and total rate-of-return swap are often used interchangeably by market participants;

 

"trade exposure"

in relation to counterparty credit risk includes the current exposure and the potential future exposure of a clearing member or a client to a central counterparty, arising from—

Provided that for purposes of this definition, the current exposure of a clearing member shall include any variation margin due to the clearing member but not yet received;

 

"trading book, portfolio or activity"

includes all positions in financial instruments and commodities held by a bank—

which instruments or positions—

but excludes such positions, instruments or commodities as may be specified in writing by the Registrar from time to time;

 

"trust companies"

in relation to the institutional and maturity breakdown of liabilities and assets means financial corporations of which the main function is the administration of trust assets and the investments of funds on behalf of the relevant beneficiaries;

[Definition inserted by regulation 40(f) of Notice No. 297, GG 40002, dated 20 May 2016]

 

"uncommitted undrawn facility or loan commitment"

in relation to a bank's off-balance sheet exposure includes any revocable undrawn commitment or facility;

 

"underlying asset"

means an asset that is protected in terms of a credit-derivative contract, which underlying asset—

 

"unfunded credit-derivative instrument"

means a contract in terms of which the protection seller does not provide collateral to a protection buyer for the settlement of the protection seller's potential future obligations;

 

"unincorporated business enterprises of households"

in relation to the institutional and maturity breakdown of liabilities and assets mean households engaged in market production as single person businesses or sole proprietorship, and partnerships, that is, legal persons not organised in the form of a company, in respect of which person the household and business accounts in most cases cannot be separated, and which single person business or sole proprietorship can be with or without employees;

 

"unit trusts"

in relation to the institutional and maturity breakdown of liabilities and assets mean collective investment schemes involving the collection of funds from individual investors for investment in a spread of assets such as money-market instruments, bonds, shares and units of other unit trusts, which unit trusts may be divided into non-money market unit trusts, that is, unit trusts primarily investing in long-term fixed-interest securities or shares, and money-market unit trusts, that is, unit trusts primarily investing in money-market instruments;

 

"variation margin"

in relation to counterparty credit risk arising from exposure to—

[Definition substituted by section 15(b) of Notice No. 724, GG44003, dated 18 December 2020 - effective 1 January 2021]

 

"volatility transaction"

in relation to the standardised approach for the measurement of a bank’s exposure to counterparty credit risk means a transaction in terms of which the relevant reference asset depends on the historical or implied volatility of a relevant risk factor.

[Definition inserted by section 11(h) of Notice No. 1427, GG44048, dated 31 December 2020 - effective 1 January 2021]