The South African Reserve Bank (SARB) published directives on liquidity risk and risk-return as well as proposed directives on completion of operational risk return (Form BA 410) and certain reporting requirements for banks. Additionally, SARB published guidance notes on capitalization requirements, correspondent banking risk management practices, and business risk assessments.
Below are the key highlights of these recent updates:
- Directive on matters related to liquidity risk. The purpose of this Directive is to provide clarity in specified cases and to direct banks in respect of the liquidity coverage ratio and the net stable funding ratio requirements of foreign entities as well as requirements related to “liquid assets month to date average held” to be reported on the Form BA 325.
- Directive on requirement to submit anti-money laundering and counter-financing of terrorism risk returns to the Prudential Authority of SARB on a periodic basis. The information required is both quantitative and qualitative in nature and requires supervised entities to maintain requisite data to be in a position to provide the details required. Banks and subsidiaries are to submit money laundering/terrorist financing/proliferation financing (ML/TF/PF) returns to the Prudential Authority quarterly. Completed ML/TF/PF risk returns must be submitted to the Prudential Authority by no later than April 30 (Quarter 1), July 31 (Quarter 2), October 31 (Quarter 3), and January 31 (Quarter 4). Mutual banks are required to submit ML/TF/PF returns twice a year covering quarter two and quarter four. This Directive is effective from the date of publication on the South African Reserve Bank website. SARB also published the frequently asked questions related to the Directive.
- Proposed directive on completion and submission of the quarterly return related to operational risk (Form BA 410). The purpose of the Form BA 410 is to obtain selected information in respect of, among other things, the bank's loss event types, recorded gross losses, and recovery of losses, the information on which is based on specified business lines and specified loss event types. SARB is requesting comments by no later than July 29, 2022.
- Proposed directive on reporting requirements in terms of Regulation 46 of the Regulations relating to Banks. Regulation 46 of the Regulations relating to Banks imposes certain reporting duties on the auditors of banks, controlling companies, and branches of foreign institutions. The purpose of this proposed Directive is to specify detailed references to the regulatory returns that have to be audited, reviewed, or concluded upon under a limited assurance framework in part fulfilment of the auditors’ respective reporting requirements in relation to Regulation 46 of the Regulations relating to Banks. This proposed Directive incorporates the changes brought about as a result of the finalization of the large exposures framework and the total loss absorbing capacity (TLAC) holdings standard’s requirements.
- Guidance note on effective date for the capitalization requirements of the revised market risk and credit valuation adjustment (CVA) frameworks. The Prudential Authority proposed to implement outstanding regulatory reforms in South Africa as set out in the Guidance Note 4/2022, dated May 09, 2022. The proposed implementation date for the revised market risk and CVA frameworks is January 01, 2024. The outbreak of the COVID-19 pandemic had far-reaching consequences to date for financial markets and economies worldwide. Thus, certain countries confirmed the delayed implementation of the Basel III post-crisis reforms in their respective jurisdictions. Based on the aforementioned, the Prudential Authority will continue to monitor progress made by the respective members of the Basel Committee on Banking Supervision in respect of the implementation of the respective Basel III post-crisis reforms and will implement the capitalization requirements of the revised market risk and CVA frameworks at a later date.
- Guidance note for matters related to the prevention of banks or controlling companies being used for any money laundering or other unlawful activity in respect of correspondent banking relationships. This guidance note sets out practices and guidelines to assist banks and controlling companies with anti-money laundering and counter terrorist financing risk management and compliance program requirements in terms of the Financial Intelligence Centre Act 38 of 2001.
- Guidance note on supervisory guidelines for matters related to the prevention of banks or controlling companies being used for any money laundering or other unlawful activity. The purpose of this guidance note is to inform and bring to the attention of banks and controlling companies practices related to the formulation of appropriate business risk assessments which contribute to effective ML/TF and proliferation financing risk management.
- Directive on Liquidity Risk
- Directive and FAQs on Risk Return
- Proposed Directive on Form BA 410
- Proposed Directive on Reporting Requirements for Banks
- Guidance Note on FRTB and CVA Capitalization Requirements
- Guidance Note on Correspondent Banking Risk Management Practices
- Guidance Note on Business Risk Assessments
Keywords: Middle East And Africa, South Africa, Banking, Liquidity Risk, AML CFT, ML TF Risk, Operational Risk, Reporting, BA 410, Basel, Market Risk, FRTB, CVA Risk, TLAC, SARB
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