| 7.8 | For the purposes of calculating capital requirements, a Multilateral Development Bank (MDB) is an institution created by a group of countries that provides financing and professional advice for economic and social development projects. MDBs have large sovereign memberships and may include both developed and /or developing countries. Each MDB has its own independent legal and operational status, but with a similar mandate and a considerable number of joint owners.
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| 7.9 | A 0% risk weight will be applied to exposures to specified MDBs that are recognized by the Basel Committee for Banking Supervision (BCBS) for fulfilling the following eligibility criteria:
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| | 1. | very high-quality long-term issuer ratings, i.e. a majority of an MDB’s externalratings must be AAA;4
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| | 2. | either the shareholder structure comprises a significant proportion of sovereigns with long-term issuer external ratings of AA– or better, or the majority of the MDB’s fund-raising is in the form of paid-in equity/capital and there is little or no leverage;
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| | 3. | strong shareholder support demonstrated by the amount of paid-in capital contributed by the shareholders; the amount of further capital the MDBs have the right to call, if required, to repay their liabilities; and continued capital contributions and new pledges from sovereign shareholders;
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| | 4. | adequate level of capital and liquidity (a case-by-case approach is necessary in order to assess whether each MDB’s capital and liquidity are adequate); and,
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| | 5. | strict statutory lending requirements and conservative financial policies, which would include among other conditions a structured approval process,internal creditworthiness and risk concentration limits (per country, sector, and individual exposure and credit category), large exposures approval by the board or a committee of the board, fixed repayment schedules, effective monitoring of use of proceeds, status review process, and rigorous assessment of risk and provisioning to loan loss reserve.
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| 7.10 | The specified MDBs eligible for a 0% risk weight are as follows. This list is subject to review by SAMA from time to time.
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| | 1. | The World Bank Group comprising the International Bank for Reconstruction and Development;
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| | 2. | The International Finance Corporation;
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| | 3. | The Multilateral Investment Guarantee Agency and the International Development Association;
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| | 4. | The Asian Development Bank;
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| | 5. | The African Development Bank;
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| | 6. | The European Bank for Reconstruction and Development;
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| | 7. | The Inter-American Development Bank;
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| | 8. | The European Investment Bank,
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| | 9. | The European Investment Fund;
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| | 10. | The Caribbean Development Bank,
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| | 11. | The Islamic Development Bank
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| | 12. | The Nordic Investment Bank;
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| | 13. | The Council of Europe Development Bank;
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| | 14. | The International Finance Facility for Immunization; and
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| | 15. | The Asian Infrastructure Investment Bank.
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| 7.11 | For exposures to all other MDBs, banks will assign to their MDB exposures the corresponding “base” risk weights determined by the external ratings according to Table 3.
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