7.1.1 | All balance sheet assets including on-balance sheet derivatives collateral and collateral for secured financing transactions (SFTs) should be included in the Leverage ratio exposure measure except for the following: | | |
| (i) | On-balance sheet derivative and SFT assets that are covered in Derivatives and 7.3 Security Financing Transactions below. | | |
| (ii) | fiduciary assets: Where a bank according to its operative accounting framework recognizes fiduciary assets on the balance sheet, these assets can be excluded from the Leverage ratio exposure measure provided that the assets meet the IFRS 9 criteria for de-recognition and, where applicable, IFRS 10 for deconsolidation. | | |
7.1.2 | On-balance sheet non-derivative assets are included in the Leverage ratio exposure measure at their accounting values less deductions for associated specific provisions. | | |
7.1.3 | General provisions or general loan loss reserves that reduce the regulatory capital should be deducted from the Leverage ratio exposure measure. For the purposes of the leverage ratio exposure measure, the definition of general provisions/general loan-loss reserves applies to all banks regardless of whether they use the standardized approach or the IRB approach for credit risk for their risk based capital calculations. | | |
7.1.4 | The accounting for regular-way purchases or sales3 of financial assets that have not been settled (hereafter “unsettled trades”) differs across and within accounting frameworks. Unsettled trades can be accounted on the trade date (trade date accounting) or on the settlement date (settlement date accounting). For the purpose of the Leverage ratio exposure measure, treatment should be as below: | | |
| (i) | Banks using trade date accounting: must reverse out any offsetting between cash receivables for unsettled sales and payables for unsettled purchases of financial assets that may be recognized under the applicable accounting framework, but may offset between those cash receivables and cash payables (regardless of whether such offsetting is recognized under the applicable accounting framework) if the following conditions are met: | | |
| | a. | The financial assets bought and sold that are associated with cash payables and receivables are fair valued through income and included in the bank's regulatory trading book as specified in Boundary between the banking book and the trading book in the Minimum Capital Requirement for Market Risk issued by SAMA. | | |
| | b. | The transactions of the financial assets are settled on a delivery- versus-payment (DVP) basis. | | |
| (ii) | Banks using settlement date: accounting will be subject to the treatment set out in paragraph 7.4 off-balance sheet items below. | | |
7.1.5 | Cash pooling refers to arrangements involving treasury products whereby a bank combines the credit and/or debit balances of several individual participating customer accounts into a single account balance to facilitate cash and/or liquidity management. For the purposes of Leverage ratio exposure measure, the treatment of cash pooling should be as follow: | | |
| (i) | where a cash pooling arrangement entails a transfer at least on a daily basis of the credit and /or debit balances of the individual participating customer accounts into a single account balance, the individual participating customer accounts are deemed to be extinguished and transformed into a single account balance upon the transfer provided the bank is not liable for the balances on an individual basis upon the transfer. Thus, the basis of the leverage ratio exposure measure for such a cash pooling arrangement is the single account balance and not the individual participating customer accounts | | |
| (ii) | If the transfer of credit and/or debit balances of the individual participating customer accounts does not occur daily, extinguishment and transformation into a single account balance is deemed to occur and this single account balance may serve as the basis of the Leverage ratio exposure measure provided all of the following conditions are met: | | |
| | a. | In addition to providing for the several individual participating customer accounts, the cash pooling arrangement provides for a single account, into which the balances of all individual participating customer accounts can be transferred and thus extinguished; | | |
| | b. | The bank first has a legally enforceable right to transfer the balances of the individual participating customer accounts into a single account so that the bank is not liable for the balances on an individual basis and second at any point in time, the bank must have the discretion and be in a position to exercise this right; | | |
| | c. | There are no maturity mismatches among the balances of the individual participating customer accounts included in the cash pooling arrangement or all balances are either overnight or on demand; and | | |
| | d. | The bank charges or pays interest and/or fees based on the combined balance of the individual participating customer accounts included in the cash pooling arrangement. | | |
| | e. | SAMA does not deem as inadequate the frequency by which the balances of individual participating customer accounts are transferred to a single account. | | |
| | | In the event the abovementioned conditions are not met, the individual balances of the participating customer accounts must be reflected separately in the Leverage ratio exposure measure. |