Risk Weights for Specialized Lending (PF, OF, CF and IPRE)

No: 44047144

Date(g): 27/12/2022 | Date(h): 4/6/1444

Effective from Jan 01 2023 - Dec 31 2022
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13.2

For project finance (PF), object finance (OF), commodities finance (CF) and income producing real estate (IPRE) exposures, banks that do not meet the requirements for the estimation of probability of default (PD) under the corporate internal ratings-based (IRB) approach will be required to map their internal grades to five supervisory categories, each of which is associated with a specific risk weight. The slotting criteria on which this mapping must be based are provided in paragraph 13.13 for PF exposures, paragraph 13.15 for OF exposures, paragraph 013.6 for CF exposures and paragraph 13.14 for IPRE exposures. The risk weights for unexpected losses (UL) associated with each supervisory category are shown in table 19 below:

Supervisory categories and unexpected loss (UL) risk weights for other SL exposures				Table 19
Strong	Good	Satisfactory	Weak	Default
70%	90%	115%	250%	0%

13.3

Although banks are expected to map their internal ratings to the supervisory categories for specialized lending using the slotting criteria, each supervisory category broadly corresponds to a range of external credit assessments as outlined in table 20 below.

				Table 20
Strong	Good	Satisfactory	Weak	Default
BBB- or better	BB+ or BB	BB- or B+	B to C	Not applicable

13.4

SAMA may allow banks to assign preferential risk weights of 50% to “strong” exposures, and 70% to “good” exposures, provided they have a remaining maturity of less than 2.5 years or SAMA determines that banks’ underwriting and other risk characteristics are substantially stronger than specified in the slotting criteria for the relevant supervisory risk category.