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    SARB Announces Regulatory Relief Measures Amid COVID-19 Outbreak

    April 07, 2020

    The Prudential Authority of SARB has announced regulatory relief measures and published guidance for banks to ease the impact of COVID-19 pandemic. The Prudential Authority has issued Directives on temporary measures to aid compliance with liquidity coverage ratio or LCR (D1/2020), to provide temporary capital relief (D2/2020), and on treatment of restructured credit exposures (D3/2020). The Prudential Authority also issued guidance notes on matters related to IFRS 9 (G3/2020) and on recommendations for distribution of dividends on ordinary shares and payment of cash bonuses to executive officers and material risk-takers (G4/2020).

    The regulatory relief measures have been announced in three areas, namely capital relief on restructured loans that were in good standing before the COVID-19 crisis, a lower liquidity coverage ratio (LCR), and lower capital requirements. As per the announcements, the Prudential Authority:

    • Temporarily amending Directive 7 of 2015 on Restructured Exposures, which means that for the duration of the crisis, loans restructured as a result of the impact of COVID-19 will not attract a higher capital charge. This amendment covers loans to households, small and medium-size businesses, and corporates and for specialized lending.
    • Lowering LCR requirement from 100% to 80%, with effect from April 01, 2020—for the duration of the crisis.
    • Lowering the Pillar 2A capital buffer, which is set at 1% of risk-weighted assets, to zero. The Prudential Authority has also provided clear criteria that provide for banks to dip into their capital conservation buffer, which is set at 2.5% of the risk-weighted assets.
    • Planning to announce a timetable according to which banks can restore these buffers once the COVID-19 crisis has abated. This timetable will be sensitive to the need to balance the rebuilding of buffers to ensure a resilient banking system, with the negative effect that such measures could have on credit extension and economic growth.
    • Providing guidance to the banking industry on how IFRS 9 could be implemented during this period of volatility and stress. The guidance outlines the expectations of the Prudential Authority when the requirements of IFRS 9 are applied to payment holidays and other relief measures, including government guarantees and other subsidies provided as a result of COVID-19.
    • Issuing a guidance note advising banks not to distribute discretionary ordinary dividends during this period. Similarly, bonuses for senior executives should also be put on hold during this period.


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    Keywords: Middle East and Africa, South Africa, Banking, COVID-19, LCR, Capital Requirements, Capital Buffer, IFRS 9, Dividend Distribution, Pillar 21, Credit Risk, SARB

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