SARB issued a Circular 4/2020 to provide clarity on interpretation and application of criteria related to exposures secured by residential mortgage bonds. Due to possible differences in the interpretation of provisions of regulation 23(8)(c), read with regulations 23(6)(b) and 23(6)(c) of the Regulations relating to banks (the Regulations) in respect of exposures secured by residential mortgage bonds, there may be inconsistencies in the capital calculations and reporting with regard to regulation 23(8)(c). For the purpose of regulation 23(8)(c), exposure shall be the sum of the on-balance sheet exposure and the off-balance sheet exposure after the application of relevant credit conversion factors.
Regulation 23(6)(b)(ii) of the Regulations specifically excludes residential mortgage loans, as specified in regulation 23(6)(c) of the Regulations, from the category of retail exposures to which a risk-weight of 75% is applied. Regulation 23(6)(c) refers to a “lending fully secured by a mortgage bond.” The circular also clarifies that this reference should be interpreted to include an individual and a legal person such as a trust or close corporation, where such exposure is, for example, supported by the personal surety of the beneficial owner of the residential property mortgaged.
Keywords: Middle East and Africa, South Africa, Banking, Securities, Residential Mortgage Backed Securities, Credit Risk, Basel, Regulatory Capital, SARB
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
The Hong Kong Monetary Authority (HKMA) announced that the Green and Sustainable Finance (GSF) Cross-Agency Steering Group has launched the information and data repositories and outlined the progress made in advancing the development of green and sustainable finance in Hong Kong.
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
The Network for Greening the Financial System (NGFS) published a report that explores the feasibility of integrating the G-Cubed general equilibrium model into the NGFS suite of models.
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.