SARB Updates Address Aspects of IRRBB, LCR, and Cyber Risk Rules
The South African Reserve Bank (SARB) launched a consultation, which ends on January 06, 2023, on revisions to certain aspects of the framework for bank exposures to interest rate risk in the banking book (IRRBB) and published a directive addressing national discretions related to the liquidity coverage ratio. Another consultation, for which comments are being sought until February 28, 2023, relates to the standard on cybersecurity and cyber resilience requirements. The proposed standard stipulates that a financial institution must notify the responsible authority, in the form and manner determined by the Authorities, after classifying a cyber incident or an information security compromise event as a material incident.
The Prudential Authority of SARB proposed Directive on IRRBB covers certain reporting requirements and instructions related to the completion of the form BA330. As a result of an earlier consultation, the Prudential Authority has decided to delete the detailed instructions for the completion of the form BA330 from regulation 30(10) of the proposed amendments to the Regulations and to insert an enabling provision that allows the Prudential Authority to issue a Directive in terms of section 6(6) of the Banks Act 1990 to specify the detailed instructions for the completion of the form BA330. Deleting the instructions from the Regulations and issuing the instructions as this Directive allows for further amendments without requiring amendments to the Regulations. The recent Draft Directive states that Regulation 30 of the Regulations, as amended to incorporate the updated IRRBB standards, shall be applied by banks only on a solo basis until IRRBB Public Disclosure requirements come into effect, from January 01, 2024, when Regulation 30 of the Regulations shall be applicable on both a solo and group consolidated basis.
The Prudential Authority also issued Directive 11/2022 to communicate to the industry the decisions related to national discretion items to be applied by banks in the calculation of the liquidity coverage ratio (LCR). Among others, the Directive stipulates the following requirements:
- Banks must include their statutory cash reserves as envisaged in Regulation 27(2) of the Regulations as Level 1 high-quality liquid assets (Level 1 HQLA)
- With respect to the haircuts on level 1 HQLA, the Prudential Authority regards it as appropriate at this stage not to impose haircuts on South African level 1 HQLA.
- In the case of equities, the Prudential Authority shall only consider equities listed on the Johannesburg Stock Exchange's (JSE) main exchange and included in the Top 40 Index for inclusion as level 2B HQLA.
- The Prudential Authority has decided to permit foreign-currency denominated level 1 HQLA to be kept for LCR compliance in the local currency, that is, to cover domestic currency net cash outflows until December 31, 2023.
- Banks must apply a 10% run-off factor for less-stable retail deposits. The run-off factor for all retail term deposits with a residual maturity or notice period greater than 30 days shall be 3%.
Related Links
Keywords: Middle East and Africa, South Africa, Banking, LCR, Basel, Reporting, IRRBB, Cyber Risk, Liquidity Risk, Regtech, BA330, SARB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
ECB and MFSA Review Bank Preparations for Addressing Climate RisksRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.