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15. IRB Approach: Treatment of Expected Losses and Provisions

Effective from Dec 28 2022 - Dec 27 2022
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15.1This chapter discusses the calculation of expected losses (EL) under the internal ratings-based (IRB) approach, and the method by which the difference between provisions (e.g. specific provisions, partial write-offs, portfolio-specific general provisions such as country risk provisions or general provisions) and EL may be included in or must be deducted from regulatory capital, as outlined in the definition of capital rules, articles 2.2.3 and 4.1.4 – Section A of SAMA Guidance Document Concerning the Implementation of Basel III (Circular No. 341000015689, Date: 19 December 2012). The treatment of EL and provisions related to securitization exposures is outlined in paragraph 18.36.