| 7.96 | For risk-weighting purposes under the standardized approach, a defaulted exposure is defined as one that is past due for more than 90 days, or is an exposure to a defaulted borrower. A defaulted borrower is a borrower in respect of whom any of the following events have occurred:
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| | 1. | Any material credit obligation that is past due for more than 90 days. Overdrafts will be considered as being past due once the customer has breached an advised limit or been advised of a limit smaller than current outstanding;
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| | 2. | Any material credit obligation is on non-accrued status (e.g. the lending bank no longer recognizes accrued interest as income or, if recognized, makes an equivalent amount of provisions);
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| | 3. | A write-off or account-specific provision is made as a result of a significant perceived decline in credit quality subsequent to the bank taking on any credit exposure to the borrower;
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| | 4. | Any credit obligation is sold at a material credit-related economic loss;
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| | 5. | A distressed restructuring of any credit obligation (i.e. a restructuring that may result in a diminished financial obligation caused by the material forgiveness, or postponement, of principal, interest or (where relevant) fees)is agreed by the bank;
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| | 6. | The borrower’s bankruptcy or a similar order in respect of any of the borrower’s credit obligations to the banking group has been filed;
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| | 7. | The borrower has sought or has been placed in bankruptcy or similar protection where this would avoid or delay repayment of any of the credit obligations to the banking group; or
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| | 8. | Any other situation where the bank considers that the borrower is unlikely to pay its credit obligations in full without recourse by the bank to actions such as realizing security.
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| 7.97 | For retail exposures, the definition of default can be applied at the level of a particular credit obligation, rather than at the level of the borrower. As such, default by a borrower on one obligation does not require a bank to treat all other obligations to the banking group as defaulted.
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| 7.98 | With the exception of residential real estate exposures treated under paragraph 7.99, the unsecured or unguaranteed portion of a defaulted exposure shall be risk- weighted net of specific provisions and partial write-offs as follows:
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| | 1. | 150% risk weight when specific provisions are less than 20% of the outstanding amount of the loan; and
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| | 2. | 100% risk weight when specific provisions are equal or greater than 20% and less than 50% of the outstanding amount of the loan.
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| | 3. | 50% risk weight when specific provisions are equal to or greater than 50% of the outstanding amount of the loan.
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| 7.99 | Defaulted residential real estate exposures where repayments do not materially depend on cash flows generated by the property securing the loan shall be risk- weighted net of specific provisions and partial write-offs at 100%. Guarantees or financial collateral which are eligible according to the credit risk mitigation framework might be taken into account in the calculation of the exposure in accordance with paragraph 7.68.
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| 7.100 | For the purpose of defining the secured or guaranteed portion of the defaulted exposure, eligible collateral and guarantees will be the same as for credit risk.
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Other assets
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| 7.101 | Article 4.4 – Section A of SAMA Guidance Document Concerning the Implementation of Basel III (Circular No. 341000015689, Date: 19 December 2012) - specifies a deduction treatment for the following exposures: significant investments in the common shares of unconsolidated financial institutions, mortgage servicing rights, and deferred tax assets that arise from temporary differences. The exposures are deducted in the calculation of Common Equity Tier1 if they exceed the thresholds set out in that article. A 250% risk weight applies to the amount of the three “threshold deduction” items listed in the article that are not deducted by the article.
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| 7.102 | The standard risk weight for all other assets will be 100%, with the exception of the following exposures:
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| | 1. | A 0% risk weight will apply to:
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| | | (a) | Cash owned and held at the bank or in transit; and
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| | | (b) | Gold bullion held at the bank or held in another bank on an allocated basis, to the extent the gold bullion assets are backed by gold bullion liabilities.
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| | 2. | A 20% risk weight will apply to cash items in the process of collection.
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