Prudential Authority Consults on Distressed Restructured Credit Exposures Directive

Posted 27 October 2026 Written by Acts Online
Category Financial Sector

Brought to you by SA Legal Academy: In terms of the Financial Sector Regulation Act, No. 9 of 2017, read with the Banks Act, No. 94 of 1990, the Prudential Authority has published a proposed replacement directive governing the regulatory treatment of distressed restructured credit exposures.

The draft measure will repeal and replace the directive in force since 21 October 2025. The regulatory intervention follows the identification of an inconsistency in the existing framework governing the probation period applicable when a distressed restructured credit exposure defaults or undergoes a subsequent restructuring.

The proposed directive introduces specific remedial provisions to:

  • Rectify conflicting rules regarding the classification of re-defaulted restructured facilities;
  • Clarify the explicit triggers and circumstances under which an exposure’s probation period must restart; and
  • Standardise regulatory capital treatment and credit impairment monitoring across banking institutions.

Stakeholders and regulated institutions are invited to submit written representations on the draft directive to the Prudential Authority by 9 November 2026.

What this means for you, your business, or your clients

  • For yourself: Banking regulatory and credit risk advisers must benchmark internal credit monitoring guidelines against the proposed rules to ensure correct interpretation of loan probation resets.
  • For your business: Regulated banks, lending institutions, and audit practices must audit credit portfolio management systems to verify that core IT infrastructure can accurately flag re-defaults and reset probation tracking ahead of the 9 November 2026 consultation cutoff.
  • For your clients: Corporate and individual borrowers negotiating credit workout arrangements or subsequent debt modifications may encounter revised forbearance terms as banks align loan covenants with clarified regulatory default probation rules.

Originally published at https://legalacademy.co.za/news/read/financial-sector-prudential-treatment-of-distressed-restructured-credit-exposures

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