7. Specific Guidance Notes – Assets
| No: 449670000041 | Date(g): 26/6/2018 | Date(h): 13/10/1439 | Status: In-Force |
| Assets assigned a 0% RSF factor comprise: | ||||
| (a) | coins and banknotes immediately available to meet obligations; | |||
| (b) | all central bank reserves (including required reserves and excess reserves);19 | |||
| (c) | all claims on central banks with residual maturities of less than six months; and | |||
| (d) | "trade date" receivables arising from sales of financial instruments, foreign currencies and commodities that (i) are expected to settle within the standard settlement cycle or period that is customary for the relevant exchange or type of transaction, or (ii) have failed to, but are still expected to, settle. | |||
| Assets assigned a 5% RSF factor comprise unencumbered Level 1 assets as defined in LCR paragraph 50, Attachment # 1, SAMA's General Guidance concerning Amended LCR, excluding assets receiving a 0% RSF as specified above, and including: | ||||
| • | marketable securities representing claims on or guaranteed by sovereigns, central banks, PSEs, the Bank for International Settlements, the International Monetary Fund, the European Central Bank and the European Community, or multilateral development banks that are assigned a 0% risk weight under the Basel II standardized approach for credit risk - Basel II - SAMA's Detailed Guidance Document relating to Pillar 1, June 2006 and as specified by BCBS and SAMA in future; and | |||
| • | Certain non-0% risk-weighted sovereign or central bank debt securities as specified in the LCR. | |||
| Assets assigned a 10% RSF factor compromise unencumbered loans to financial institutions with residual maturities of less than six months, where the loan is secured against Level 1 assets as defined in LCR paragraph 50, Attachment # 1, SAMA's General Guidance concerning Amended LCR, and where the bank has the ability to freely re-hypothecate the received collateral for the life of the loan. | ||||
| Assets assigned a 15% RSF factor comprise: | ||||
| (a) | unencumbered Level 2A assets as defined in LCR paragraph 52, Attachment# 1, SAMA's General Guidance concerning Amended LCR, including: | |||
| • | marketable securities representing claims on or guaranteed by sovereigns, central banks, PSEs or multilateral development banks that are assigned *a 20% risk weight under the Basel II standardized approach for credit risk Basel II - SAMA's Detailed Guidance Document relating to Pillar 1, June 2006; and | |||
| • | corporate debt securities (including commercial paper) and covered bonds with a credit rating equal or equivalent to at least AA-; | |||
| (b) | All other unencumbered loans to financial institutions with residual maturities of less than six months not included in "Assets assigned a 10% FSF factor" in the previous page. | |||
| Assets assigned a 50% RSF factor comprise: | ||||
| (a) | unencumbered Level 28 assets as defined and subject to the conditions set forth in LCR paragraph 54, Attachment # 1, SAMA's General Guidance concerning Amended LCR, including: | |||
| • | residential mortgage-backed securities (RMBS) with a credit rating of at least AA; | |||
| • | corporate debt securities (including commercial paper) with a credit rating of between A+ and BBB-; and | |||
| • | exchange-traded common equity shares not issued by financial institutions or their affiliates; | |||
| Note: Level 2B Assets have not been adopted for NSFR purposes and hence any securities that do not qualify for Level 1 or Level 2A Assets under LCR guidelines issued by SAMA - need to be classified under securities that do not meet the definition of HQLA and therefore no securities should be classified under Level 2B HQLA, whilst computing NSFR or disclosing the same. | ||||
| (b) | any HQLA as defined in the LCR that are encumbered for a period of between six months and less than one year; | |||
| (c) | all loans to financial institutions and central banks with residual maturity of between six months and less than one year; and | |||
| (d) | deposits held at other financial institutions for operational purposes, as outlined in LCR paragraphs 93-104. Attachment # 1, SAMA's General Guidance concerning Amended LCR. that are subject to the 50% ASF factor of this document; and | |||
| (e) | all other non-HQLA not included in the above categories that have a residual maturity of less than one year, including loans to non-financial corporate clients, loans to retail customers (i.e. natural persons) and small business customers, and loans to sovereigns and PSEs. | |||
| Assets assigned a 65% RSF factor comprise: | ||||
| (a) | unencumbered residential mortgages with a residual maturity of one year or more that would qualify for a 35% or lower risk weight under the Basel II standardized approach for credit risk - Currently SAMA does not allow at RWA of 35% or less for residential mortgage; and | |||
| (b) | other unencumbered loans not included in the above categories, excluding loans to financial institutions, with a residual maturity of one year or more that would qualify for *a 35% or lower risk weight under the Basel II standardized approach for credit risk - Basel II- SAMA's Detailed Guidance Document relating to Pillar 1. June 2006. | |||
| Assets assigned an 85% RSF factor comprise: | ||||
| (a) | Cash, securities or other assets posted as initial margin for derivative contracts20 and cash or other assets provided to contribute to the default fund of a central counterparty (CCP). Where securities or other assets posted as initial margin for derivative contracts would otherwise receive a higher RSF factor, they should retain that higher factor. | |||
| (b) | other unencumbered performing loans21 that do not qualify for the *35% or lower risk weight under the Basel II standardized approach (Basel II - SAMA's Detailed Guidance Document relating to Pillar 1. June 2006) for credit risk and have residual maturities of one year or more, excluding loans to financial institutions; | |||
| (c) | unencumbered securities with a remaining maturity of one year or more and exchange-traded equities, that are not in default and do not qualify as HQLA according to the LCR; and | |||
| (d) | Physical traded commodities, including gold. | |||
| Assets assigned a 100% RSF factor comprise: | ||||
| (a) | All assets that are encumbered for a period of one year or more; | |||
| (b) | NSFR derivative assets as calculated according item# 5 of this document Section B definition of "Required Stable Funding" paragraphs entitled "Calculations of Derivative assets amount, Net of NSFR derivative liabilities as calculated according to Item # 5 titled "General Guidance Section A: Definition of Available Stable Funding", if NSFR derivative assets are greater than NSFR derivative liabilities;22 | |||
| (c) | all other assets not included in the above categories, including nonperforming loans, loans to financial institutions with a residual maturity of one year or more, non-exchange-traded equities, fixed assets, items deducted from regulatory capital, retained interest, insurance assets, subsidiary interests and defaulted securities; and | |||
| (d) | 20% of derivative liabilities (i.e. negative replacement cost amounts) as calculated according to General Guidance Section A "Definition of Available Stable Funding" (item # 5), (before deducting variation margin posted). | |||
| Note: Prudential return 2 (refer prudential return section of this document) summarises the specific types of assets to be assigned to each asset category and their associated RSF factor. | ||||
| The NSFR assigns a 20% "required stable funding" factor to derivative liabilities. Although the Basel Committee has agreed that, at national discretion, jurisdictions may lower the value of this factor, with a floor of 5%, SAMA has decided not to exercise this discretion. | ||||
19 It should be noted that no central bank reserves mandated by SAMA (either required reserves or excess reserves) require RSF factor greater than 0%.
20 Initial margin posted on behalf of a customer, where the bank does not guarantee performance of the third party, would be exempt from this requirement.
21 Performing loans are considered to be those that are not past due for more than 90 days in accordance with *page 23 and 24 of the Basel II standardized approach (Basel II - SAMA's Detailed Guidance Document relating to Pillar 1, June 2006. Conversely, non-performing loans are considered to be loans that are more than 90 days past due.
22 RSF = 100% x MAX ((NSFR derivative assets - NSFR derivative liabilities), 0).
* Reference to that circular is no longer relevant. This Circular has been superseded by Basel III Reforms, (44047144), dated 04/06/1444 H.