SARB Proposes Final Basel Rules, Issues STC Securitization Directive
The Prudential Authority (PA), which was established under the auspices of the South African Reserve Bank (SARB), is proposing to amend banking regulations to incorporate the remaining components of the final Basel III post-crisis regulatory reforms issued by the Basel Committee. The appendices to the consultation contain the associated revised draft reporting templates and instructions for the banking sector. SARB also published a proposed Directive on completion of the quarterly operational risk form BA 400 that addresses conditions for banks to comply with in relation to the standardized approach; these conditions become effective from the implementation date of the proposed amended Regulations—that is, from January 01, 2024 onward. The comment period for these proposals ends on October 21, 2022. Also published was a guidance note (Guidance Note 11/2022) on completion and submission of the quarterly operational risk form BA 410 and a Directive (Directive 10/2022) on the criteria for identifying simple, transparent, and comparable (STC) term and short- term securitizations.
The Proposed Directive on the final Basel III regulatory reforms covers the standardized and the internal ratings-based (IRB) approaches for credit risk, the new standardized approach for operational risk, the revised exposure definition of the leverage ratio framework, and the requirements for the output floor calculations. The Basel Ill reforms replace the existing Basel II floor with a floor based on the revised Basel Ill standardized approaches. The proposed reporting templates include Forms BA 200 and 210 (monthly and quarterly forms on credit risk approaches data); BA 400, 410, and 420 (operational risk data collection); and BA 700 (capital adequacy and leverage). As per the proposal, in terms of the Basel Ill post-crisis regulatory reforms and the related required output floor calculation from the Basel Committee, banks must calculate their risk-weighted assets as the higher of:
- total risk-weighted assets calculated using the approaches that the bank has supervisory approval to use in accordance with the Basel capital framework (including both standardized and internal model-based approaches)
- a specified percentage of the total risk-weighted assets calculated using only the standardized approaches phased in over a specified period, commencing from the effective date of the rules up to January 01, 2028
Since it has been decided to implement the proposed amendments to the Regulations in South Africa with effect from January 01, 2024, instead of the internationally agreed implementation date of January 01, 2023, as set out in Guidance Note 4 of 2022, and not to deviate from the respective internationally agreed phase-in percentages related to the output floor calculation during the period 2024 to 2028, South Africa will commence with a phase-in output floor percentage of 55% on January 01, 2024. In addition, at national discretion, supervisors may cap the increase in a bank's total risk-weighted exposure that results from the application of the output floor during its phase-in period. The transitional cap on the increase in risk-weighted exposure is set at 25% of a bank's risk-weighted exposure before the application of the floor. If a supervisor uses this discretion, a bank's risk-weighted exposure will effectively be capped at 1.25 times the internally calculated risk-weighted exposure during that time.
Related Links
- Consultation on Final Basel III Reforms
- Proposed Directive on Form BA 400
- Guidance Note on Form BA 410
- Directive on STC Securitizations
Keywords: Middle East And Africa, South Africa, Banking, Basel, Reporting, STC Securitization, Leverage Ratio, Output Floor, Credit Risk, Operational Risk, Regulatory Capital, 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
EBA Sets Out Roadmap for 2023, Updates Reporting Framework 3.2Next Article
SBV Issues Circular on Bank Guarantee RegulationsRelated 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.
