Appendix VI
| No: 1651/67 | Date(g): 8/9/2019 | Date(h): 9/1/1441 |
Effective from Oct 01 2019 - Sep 30 2019
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Definition of exposure value13
Banking book on-balance sheet non-derivative assets:
The exposure value must be defined as the accounting value of the exposure i.e. Net of specific provisions and value adjustments. As an alternative, a bank may consider the exposure value gross of specific provisions and value adjustments.
Banking book and trading book OTC derivatives (and any other instrument with counterparty credit risk):
The exposure value for instruments that give rise to counterparty credit risk and are not securities financing transactions must be the exposure at default according to the standardised approach for counterparty credit risk (SA-CCR - (See SAMA Circular No 351000095021,21 May 2014 and circular no. 371000101120 dated 20 June 2016. Basel Committee on Banking Supervision Document of March 2014 regarding the Standardized Approach for Measuring Counterparty Credit Risk Exposures).
Securities financing transactions:
BCBS has revised Standardized approach for measuring counterparty credit risk in March 2014 implemented by SAMA via. Circular no. 371000101120 dated 20 June 2016. In addition, BCBS has revised the comprehensive approach used for the measurement of Securities Financing Transaction (SFT) exposures in December 2017 which SAMA will apply in future. All banks must use the revised comprehensive approach with supervisory haircuts or equivalent non-internal model method for large exposure purposes. However, until SAMA issues these revised rules, banks would be allowed to use the method they currently use for calculating their risk-based capital requirements against SFTs (i.e. GN 2, Page 14, of Basle II Package of Bank Prudential Returns and Guidance Notes Concerning Standardized Approach. 2007 and Chapter 6.1, Page 157. Basel II - SAMA's Detailed Guidance Document)
Banking book “traditional” off-balance sheet commitments:
For the purpose of the large exposures framework, off-balance sheet items will be converted into credit exposure equivalents through the use of credit conversion factors (CCFs) by applying the CCFs set out for the standardised approach for credit risk for risk-based capital requirements, with a floor of 10%.
13 Paragraphs 32-35 of BCBS “Supervisory framework for measuring and controlling large exposures' April 2014