Annex 1: Eligibility Detailed Criteria
| No: 43041880 | Date(g): 13/12/2021 | Date(h): 9/5/1443 |
Effective from Dec 26 2021 - Dec 25 2021
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| Waterfall Level | Eligible Transaction Types | Eligible Counterparty | Minimum Transaction Size | Minimum No. of Transactions |
| Level 1 | ■ Unsecured wholesale Saudi Riyal deposits received or raised by the SAIBOR contributor bank from an eligible counterparty. ■ Domestic primary and secondary market transactions by a SAIBOR contributor bank where it raises funds via unsecured certificates of deposit (CDs) and commercial paper (CPs) where such instruments are:
Exclusions: - Structured deposits - Internal transactions such as transactions with a subsidiary (including a subsidiary that is a fund and including transactions between contributor bank branches and its head office). - Unsecured deposits made by SAMA unless expressly advised otherwise by SAMA and where transacted at market prices. - Transactions which have been Entered into outside of the applicable lookback period. See Lookback Period below. - Transactions that occurs before a move in the repo or reverse repo policy rates by SAMA. See SAMA Policy Rate Moves below. | ■ Banks ■ AH central banks4 ■ Government Related Entities (GREs) ■ Non-bank Financial Institutions ■ Corporates and all retail segments (that meet the required minimum threshold amount) | ■ O/N, 1 week, 1 month and 3 month SAIBOR tenors - minimum size for individual transactions of SAR 10mm ■ 6 month and 12 month SAIBOR tenors: ■ no minimum size for individual transactions. ■ -aggregate transaction size of all transactions used in the VWAP calculation must be equal to or greater than SAR 50mm. | ■ Transactions with a minimum of 2 different counterparties, provided if only one eligible transaction has taken place following a move in policy rates by SAMA during the Lookback Period, that single transaction shall be used to make a Level 1 submission. |
| Level 2 | ■ Saudi Riyal repo transactions (excluding those with SAMA) which have the economic effect of the contributing bank being the receiver (i.e. borrower) of Saudi Riyals. All types of Saudi Riyal fixed income securities are permitted collateral for an eligible repo transaction. Exclusions: - Internal transactions such as with a subsidiary (including a subsidiary that is a fund and including transactions between contributor banks between contributor banks branches and its head office). - Repo transactions with SAMA. - Transactions that occurs before a move in the repo or reverse repo policy rates by SAMA. See SAMA Policy Rate Moves below. | As per Level 1 | As per Level 1 | A Level 2 submission may be made using a single eligible repo transaction. |
| Level 3 | Subject to the "Sama Policy Rate Moves", acceptable Level 3 inputs that may be used to form the expert judgment used to determine a Level 3 submission are5: ■ Transactions that are outside the specified tenor buckets; ■ Interpolation/extrapolation (from transactions in the markets underlying Level 1 and Level 2); ■ Other market instruments: interest rate swaps, money market operation rates, forward rate agreement/single period swaps, overnight-indexed swaps, SAMA bills; ■ Macro-economic factors (monetary policy change, policy rate change in major economies & significant economic data); ■ Credit standing i.e. a published and verifiable change in the credit standing of the bank; and ■ Other factors: those that can be evidenced and verified, as agreed with a contributor panel bank's internal compliance and risk. | |||
| The key terms set out in the above table be defined as following: | ||
| ■ | Lookback Period: When identifying eligible transactions for Level 1 or Level 2, a SAIBOR contributor bank must first use transactions executed during the last business day. If there are insufficient eligible transactions in the last business day, the SAIBOR contributor bank may extend the period to the last two business days. This process may be repeated, extending the period by one business day at a time, until either sufficient eligible transactions have been obtained or until a maximum of five business days has been reached. | |
| For the avoidance of doubt, the process of looking back by one extra day at a time (up to a maximum of 5 business days and subject to any moves in policy rates by SAMA) must be completed for Level 1 before the contributor bank moves to Level 2. If sufficient eligible transactions are found in the Lookback Period for Level 1, these will be used to create a submission even if more recent transactions exist that would be eligible for Level 2. Banks are allowed to use Level 3 inputs without any restriction on maximum number of business days. | ||
| ■ | SAMA Policy Rate Moves: No transaction that occurs before a move in the repo or reverse repo policy rates by SAMA will be an eligible transaction for Level 1 or Level 2. This also applies intraday: any transaction that occurs before a policy rate during a business day will not be an eligible transaction. The following process shall apply following a policy rate move by SAMA: | |
| 1. | Eligible transactions that take place after the policy rate move will be used to make a Level 1 submission. If there are insufficient eligible transactions (see Level 1 eligibility criteria above) following such a move during the maximum five day look back period, Level 2 will be used. | |
| 2. | Eligible transactions that take place after the policy rate move will be used to make a Level 2 submission. If there are insufficient eligible transactions (see Level 2 eligibility criteria above) following such a move during the maximum five day look back period, Level 3 will be used. | |
| 3. | Where Level 3 is used following a policy rate move by SAMA, both Level 1 eligible transactions and also Level 1 transactions that would have been eligible except for the fact that they took place before the move in policy rates by SAMA will be used, when exercising expert judgment, to create a VWAP, subject to the process described under Lookback Period above. The VWAP will then be adjusted by the SAIBOR contributor bank to adjust for the effect of the move in policy rates. Such adjustment will be in accordance with the contributor bank's documented internal submission procedures. Submissions for SAIBOR will include the Spread Percentage adjustment to the final VWAP and submissions for SAIBID will exclude the Spread Percentage adjustment to the final VWAP. | |
| 4. | Where Level 3 is used following a policy rate move by SAMA and there are insufficient Level 1 eligible transactions (see Level 1 eligibility criteria above) to create a submission even when including Level 1 transactions that took place before the move in policy rates, then both Level 2 eligible transactions and also Level 2 transactions that would have been eligible except for the fact that they took place before the move in policy rates by SAMA will be used to create a VWAP, subject to the process described under Lookback Period above and including the adjustment for the credit premium detailed above under "Credit Spread Adjustment (Level 2)". For the purposes of exercising expert judgment, the VWAP will then be adjusted by the SAIBOR contributor bank to adjust for the effect of the move in policy rates. Such adjustment will be in accordance with the contributor bank's documented internal submission procedures. Submissions for SAIBOR will include the Spread Percentage adjustment to the final VWAP and submissions for SAIBID will exclude the Spread Percentage adjustment to the final VWAP. | |
| 5. | If there are insufficient transactions for both Level 1 and Level 2 including transactions that took place prior to a policy move by SAMA, expert judgment alone will be used by a SAIBOR contributor bank to make a submission. | |
| 6. | Where a VWAP is adjusted at Level 3 as described above, the size of the adjustment should not exceed the size of the move in policy rates by SAMA except where the SAIBOR contributor bank has strong reasons to believe that a larger adjustment is required to ensure that the submission is representative of current market conditions. In all cases where expert judgment is used including such VWAP adjustments, a contributor bank must record all the factors used in determining the submission it makes as detailed under "Expert Judgment" above. | |
4 Including SAMA deposits but only where transacted at market prices and are specified for inclusion by SAMA
5 Level 3 should represent the Bid-side of the market but SAIBOR submissions determined using Level 3 should include the Spread Percentage (see table in Section 2.2)