Attachment 5.3: National Discretion – IRB Approach
Effective from Jun 12 2006 - Jun 11 2006
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| Reference to Basel II Document | Areas of National Discretion | SAMA's Position |
| 227 | Definition of HVCRE. | N/A |
| 231 | Establish exposure threshold to distinguish between retail and corporate. | Yes |
| 231 | For residential mortgages, set limits on the maximum number of housing units per exposure. | N/A |
| 232 | Set a minimum number of exposures within a pool for exposures in that pool to be treated as retail. | No |
| 237 (FN59) | Debts with economic substance of equity may not be included where directly hedged by an equity holding. | Yes |
| 238 | Re-characterize debt holding as equities for regulatory purposes. | Yes |
| 242 | Purchased receivables: Size and concentration limits above which using the "bottom-up" approach. | No |
| 249 - 251 & 283 | HVCRE: banks will be able to use the foundation or advanced approaches, similar to the corporate approach, but with a separate RW function. | N/A |
| 267 - 269 | For a maximum of ten years, exempt equity exposures from the IRB treatment. | No |
| 274 | Firm-size adjustment and threshold for SME based on total assets instead of total sales. | Yes |
| 277 | Lower SL RWs, 75% to strong exposures and 100% to good exposures. | Yes |
| 282 | HCVRE: assign preferential RW of 75% to "strong" exposures, and 100% to "good" Exposures. | N/A |
| 288 | Employ a wider definition of subordinated loan for a 75% LGD under FIRB. | Yes |
| 318 - 319 | Determine whether to use an explicit or implicit M adjustment under FIRB. | Implicit |
| 319 | Exemption on explicit M to smaller domestic firms, those with consolidated sales and assets of less than SR. 500 million. | No |
| 321 - 322 | Determine within the explicit M adjustment which instrument will apply for the carve-out from the one-year maturity floor. | Yes |
| 341 -342 | Equity: which approach or approaches (market based or PD/LGD approach) will be used. | Market |
| 344 - 349 | Equity: which market-based approaches [simple risk weight (SRW) or internal models method] to use. | Both |
| 356 | Exclude equity whose debt obligations qualify for a zero RW under SA. | No |
| 357 | Exemption for equity under legislative Programmes. | No |
| 358 | Exemption for equity based on materiality Threshold. | Yes |
| 378 | Assign preferential RWs to HVCRE. | N/A |
| 385 | Treatment where calculated EL amount is lower than provisions. | Yes |
| 404 | Require a greater number of borrowers grades than seven for non-defaulted borrowers and one defaulted. | Yes |
| 257 | Phase roll out of the IRB approach across the banking group. | Yes |
| 259 | Exemption from IRB for some exposures in non-significant business units that are immaterial | Yes |
| 260 | Equity on IRB, even if banks opts for SA. | No |
| 264 - 265 | Relaxation of data requirement for a transitional period | Yes |
| 443 | Require an external audit of the bank's rating assignment process and estimation of loss characteristics | Yes |
| 452 (FN 82) | For retail and PSE, default is considered if past due more than 180 days. For corporate, only for a transitional period of five years | No |
| 458 | Establish more specific requirements on re-ageing | No |
| 467 | Mandatory to adjust PD estimates upward for anticipated seasoning effects | Yes |
| 521 | Determine other physical collateral as risk mitigant under the foundation approach that meet the criteria. | Yes |