Regulations > Regulations relating to Banks > Chapter II : Financial, Risk-based and other related Returns and Instructions, Directives and Interpretations relating to the completion thereof > 38. Capital Adequacy, Leverage and TLAC > Capital Adequacy, Leverage and TLAC - Directives and interpretations for completion of monthly return concerning capital adequacy, leverage and TLAC (Form BA 700)

(2)	Calculation of aggregate amount of risk-weighted exposure

Subject to the provisions of paragraphs (g) and (h) below, for the measurement or calculation of a bank’s aggregate amount of risk-weighted exposure as contemplated in section 70(2), 70(2A) or 70(2B) of the Act, the bank—

(a)	shall at the discretion of the bank, use one of the alternative methodologies specified below to determine the bank’s exposure to credit risk:

(i)	The standardised approach, using one of the alternative frameworks prescribed in regulation 23(5) read with the relevant provisions of regulations 23(6) to 23(9);

(ii)	Subject to the prior written approval of the Authority and such conditions as may be specified in writing by the Authority, the IRB approach, using one of the alternative frameworks prescribed in regulation 23(10) read with the relevant provisions of regulations 23(11) to 23(14);

(iii)

Subject to the prior written approval of the Authority and such conditions as may be specified in writing by the Authority, a combination of the approaches envisaged in subparagraphs (i) and (ii) above.

(b)	shall at the discretion of the bank, use one of the alternative methodologies specified below to determine the bank’s exposure to counterparty credit risk:

(i)	the standardised approach specified in regulation 23(18);

(ii)	subject to the prior written approval of and such further conditions as may be specified in writing by the Authority the internal model method specified in regulation 23(19);

(iii)

subject to the relevant requirements specified in regulation 23(15) and the prior written approval of and such conditions as may be specified in writing by the Authority, a combination of the approaches envisaged in subparagraphs (i) and (ii) above;

(c)	shall at the discretion of the bank, use one of the alternative methodologies specified below to determine the bank’s exposure to credit valuation adjustment:

(i)	The basic approach for credit valuation adjustment (BA-CVA);

(ii)	Subject to the prior written approval of the Authority and such conditions as may be specified in writing by the Authority, the standardised approach for credit valuation adjustment (SA-CVA);

(d)	shall at the discretion of the bank, use one of the alternative methodologies specified below to determine the bank’s exposure to market risk:

(i)	The simplified standardised approach for market risk set out in the relevant Prudential Standard issued from time to time;

(ii)	Subject to the prior written approval of the Authority and such further conditions as may be specified in writing by the Authority, the standardised approach for market risk set out in the relevant Prudential Standard issued from time to time; or

(iii)

Subject to the prior written approval of the Authority and such further conditions as may be specified in writing by the Authority, the internal models approach for market risk set out in the relevant Prudential Standard issued from time to time.

(e)	shall use the standardised approach specified in regulation 33(4) to determine the bank’s exposure to operational risk;

(f)	shall, based on—

(i)	the approach adopted by the bank for the measurement of the bank’s exposure to credit risk, as envisaged in paragraph (a) above; and

(ii)	such conditions as may be specified in writing by the Authority, use one of the alternative approaches specified below to determine the bank’s exposure in respect of securitisation schemes:

(A)	the standardised approach prescribed in regulation 23(5) read with the relevant provisions of regulations 23(6)(h) and 23(8)(h) respectively;

(B)	the IRB approach prescribed in regulation 23(10) read with the relevant provisions of regulations 23(11) and 23(13) respectively.

(g)	shall, in order to reduce potential excessive variability in its calculated amount of risk-weighted exposure and to promote comparability of banks’ capital adequacy ratios, within and across jurisdictions—

(i)

apply a floor requirement in respect of the bank’s calculated amount of risk-weighted exposure, which floor requirement is based upon a specified percentage of risk-weighted exposure calculated in terms of the respective standardised approaches envisaged in paragraphs (a) to (f) hereinbefore read with the requirements specified in paragraph (h) below for the calculation of the bank’s aggregate amount of risk-weighted exposure;

(ii)	ensure that the bank’s calculated amount of risk-weighted exposure used in the calculation of, among others, the bank’s respective minimum required amounts of capital and reserve funds or capital adequacy ratios, is in all relevant cases equal to the higher of:

(A)

the relevant phase-in percentage of the output floor specified in table 1 in paragraph (h) of total risk-weighted exposure calculated in terms of the respective standardised approaches only, specified in table 1 in paragraph (h) below, which calculated aggregate amount of risk-weighted exposure read with the relevant specified phase-in percentage of the output floor shall for purposes of these Regulations constitute the bank’s relevant output floor related to the relevant specified period; and

(B)	the total risk-weighted exposure amount calculated in terms of the respective approaches envisaged in paragraphs (a) to (f) hereinbefore, adopted by the bank, with the prior written approval of the Authority in all relevant cases;

(h)	shall apply the respective standardised approaches and the relevant percentages specified in table 1 below when the bank calculates the relevant required output floor envisaged in paragraph (g) hereinbefore:

Table 1

Description of approach

Output floor component

(i)	Credit risk

The standardised approach for credit risk envisaged in paragraph (a)(i) hereinbefore read with the relevant requirements specified in regulations 23(8) and 23(9), and regulation 23(20) in respect of any failed trades or non-delivery-versus-payment transactions, provided that when the bank calculates the relevant credit risk mitigation amount, the bank shall apply the relevant carrying value when the bank applies the simple approach or comprehensive approach with the relevant specified standardised haircuts

(ii)	Counterparty credit risk

The standardised approach for counterparty credit risk envisaged in paragraph (b)(i) hereinbefore read with the relevant requirements specified in regulation 23(18) related to the SA-CCR approach for the calculation of the relevant exposure amount related to derivative instruments, which exposure amount shall be multiplied with the relevant borrower risk weight using the standardised approach for credit risk envisaged in regulation 23(8) to calculate the relevant required amount of risk-weighted exposure

(iii)

Credit valuation adjustment

The standardised approach for credit valuation adjustment (SA-CVA), the Basic Approach for credit valuation adjustment (BA-CVA) or 100% of a bank’s counterparty credit risk capital requirement, as the case may be, as adopted by the bank for the calculation of the bank’s relevant exposure to CVA risk

(iv)	Securitisation

Securitisation exposure calculated in terms of the external ratings-based approach (SEC-ERBA), the standardised approach (SEC-SA) or a risk-weight of 1250 per cent, as the case may be, as adopted by the bank for the calculation of the bank’s relevant securitisation exposure

(v)	Market risk

The standardised approach or simplified standardised approach for market risk envisaged in paragraphs (d)(i) and (d)(ii) hereinbefore read with the requirements specified in the relevant Prudential Standard issued from time to time, and the SEC-ERBA, SEC-SA or a risk-weight of 1250 per cent used to determine the default risk charge component for securitisation exposures held in the bank’s trading book

(vi)	Operational risk

The standardised approach for operational risk envisaged in paragraph (e) hereinbefore read with the relevant requirements specified in regulation 33(4)

(vii)Aggregate exposure amount

Aggregate amount of risk-weighted exposure calculated in terms of the respective specified approaches

Aggregate output floor = sum of components to f1

Output floor phase-in period

Output floor phase-in percentage 2; 3

From 1 July 2025

60% of aggregate output floor

From 1 January 2026

65% of aggregate output floor

From 1 January 2027

70% of aggregate output floor

From 1 January 2028 onwards

72.5% of aggregate output floor

1.	Prior to the application of any specified phase-in percentage.

2.	Specified percentage of risk-weighted exposure calculated in terms of the respective standardised approaches envisaged in paragraphs (a) to (f) hereinbefore read with the requirements specified in this table 1.

Or such percentage as may be directed in writing by the Authority to cap the incremental increase in a bank’s total risk-weighted exposure amount resulting from the application of the specified output floor, to a maximum increase of 25 per cent of the bank’s risk-weighted exposure amount before the application of the relevant specified floor.

[Regulation 38(2) substituted by section 6(a) of Notice 6342, GG52907, dated 26 June 2025, shall come into operation on 1 July 2025]

Banks Act, 1990 (Act No. 94 of 1990)

Regulations

Regulations relating to Banks

Chapter II : Financial, Risk-based and other related Returns and Instructions, Directives and Interpretations relating to the completion thereof

38. Capital Adequacy, Leverage and TLAC

Capital Adequacy, Leverage and TLAC - Directives and interpretations for completion of monthly return concerning capital adequacy, leverage and TLAC (Form BA 700)

Subregulation (2)