12. Overview of Risk Management, Key Prudential Metrics and RWA

No: 44047144

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

Status: In-Force

Effective from Jan 01 2023 - Dec 31 2022
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12.1	The disclosure requirements under this section are:
	12.1.1	Template KM1 - Key metrics (at consolidated level)
	12.1.2	Template KM2 - Key metrics - total loss-absorbing capacity (TLAC) requirements (at resolution group level)
	12.1.3	Table OVA - Bank risk management approach
	12.1.4	Template OV1 - Overview of risk-weighted assets (RWA)
12.2	The disclosure requirements related to TLAC are not required to be completed by banks unless otherwise specified by SAMA.
12.3	Template KM1 provides users of Pillar 3 data with a time series set of key prudential metrics covering a bank’s available capital (including buffer requirements and ratios), its RWA, leverage ratio, Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). As set out in circular No.391000029731 dated 15/03/1439 AH, banks are required to publicly disclose whether they are applying a transitional arrangement for the impact of expected credit loss accounting on regulatory capital. If a transitional arrangement is applied, Template KM1 will provide users with information on the impact on the bank’s regulatory capital and leverage ratios compared to the bank’s “fully loaded” capital and leverage ratios had the transitional arrangement not been applied.
12.4	Template KM2 requires global systemically important banks (G-SIBs) to disclose key metrics on TLAC. Template KM2 becomes effective from the TLAC conformance date.
12.5	Table OVA provides information on a bank’s strategy and how senior management and the board of directors assess and manage risks.
12.6	Template OV1 provides an overview of total RWA forming the denominator of the risk-based capital requirements.

Template KM1: Key metrics (at consolidated group level)

Purpose: To provide an overview of a bank’s prudential regulatory metrics.

Scope of application: The template is mandatory for all banks.

Content: Key prudential metrics related to risk-based capital ratios, leverage ratio and liquidity standards. Banks are required to disclose each metric’s value using the corresponding standard’s specifications for the reporting period-end (designated by T in the template below) as well as the four previous quarter-end figures (T–1 to T–4). All metrics are intended to reflect actual bank values for (T), with the exception of “fully loaded expected credit losses (ECL)” metrics, the leverage ratio (excluding the impact of any applicable temporary exemption of central bank reserves) and metrics designated as “pre-floor” which may not reflect actual values.

Frequency: Quarterly.

Format: Fixed. If banks wish to add rows to provide additional regulatory or financial metrics, they must provide definitions for these metrics and a full explanation of how the metrics are calculated (including the scope of consolidation and the regulatory capital used if relevant). The additional metrics must not replace the metrics in this disclosure requirement.

Accompanying narrative: Banks are expected to supplement the template with a narrative commentary to explain any significant change in each metric’s value compared with previous quarters, including the key drivers of such changes (eg whether the changes are due to changes in the regulatory framework, group structure or business model).
Banks that apply transitional arrangement for ECL are expected to supplement the template with the key elements of the transition they use.

		a	b	c	d	e
		T	T-1	T-2	2-3	T-4
	Available capital (amounts)
1	Common Equity Tier 1 (CET1)
1a	Fully loaded ECL accounting model
2	Tier 1
2a	Fully loaded ECL accounting model Tier 1
3	Total capital
3a	Fully loaded ECL accounting model total capital
	Risk-weighted assets (amounts)
4	Total risk-weighted assets (RWA)
4a	Total risk-weighted assets (pre-floor)
	Risk-based capital ratios as a percentage of RWA
5	CET1 ratio (%)
5a	Fully loaded ECL accounting model CET1 (%)
5b	CET1 ratio (%) (pre-floor ratio)
6	Tier 1 ratio (%)
6a	Fully loaded ECL accounting model Tier 1 ratio (%)
6b	Tier 1 ratio (%) (pre-floor ratio)
7	Total capital ratio (%)
7a	Fully loaded ECL accounting model total capital ratio (%)
7b	Total capital ratio (%) (pre-floor ratio)
	Additional CET1 buffer requirements as a percentage of RWA
8	Capital conservation buffer requirement (2.5% from 2019) (%)
9	Countercyclical buffer requirement (%)
10	Bank G-SIB and/or D-SIB additional requirements (%)
11	Total of bank CET1 specific buffer requirements (%) (row 8 + row 9 + row 10)
12	CET1 available after meeting the bank’s minimum capital requirements (%)
	Basel III leverage ratio
13	Total Basel III leverage ratio exposure measure
14	Basel III leverage ratio (%) (including the impact of any applicable temporary exemption of central bank reserves)
14a	Fully loaded ECL accounting model Basel III leverage ratio (including the impact of any applicable temporary exemption of central bank reserves) (%)
14b	Basel III leverage ratio (%) (excluding the impact of any applicable temporary exemption of central bank reserves)
14c	Basel III leverage ratio (%) (including the impact of any applicable temporary exemption of central bank reserves) incorporating mean values for SFT assets
14d	Basel III leverage ratio (%) (excluding the impact of any applicable temporary exemption of central bank reserves) incorporating mean values for SFT assets
	Liquidity Coverage Ratio (LCR)
15	Total high-quality liquid assets (HQLA)
16	Total net cash outflow
17	LCR ratio (%)
	Net Stable Funding Ratio (NSFR)
18	Total available stable funding
19	Total required stable funding
20	NSFR ratio

Instructions

Row Number	Explanation
4a	For pre-floor total RWA, the disclosed amount should exclude any adjustment made to total RWA from the application of the capital floor.
5a, 6a, 7a, 14a	For fully loaded ECL ratios (%) in rows 5a, 6a, 7a and 14a, the denominator (RWA, Basel III leverage ratio exposure measure) is also “Fully loaded ECL”, ie as if ECL transitional arrangements were not applied.
5b, 6b, 7b	For pre-floor risk based ratios in rows 5b, 6b and 7b, the disclosed ratios should exclude the impact of the capital floor in the calculation of RWA.
12	CET1 available after meeting the bank’s minimum capital requirements (as a percentage of RWA): it may not necessarily be the difference between row 5 and the Basel III minimum CET1 requirement of 4.5% because CET1 capital may be used to meet the bank’s Tier 1 and/or total capital ratio requirements. See instructions to [CC1:68/a].
13	Total Basel III leverage ratio exposure measure: The amounts may reflect period-end values or averages depending on local implementation.
15	Total HQLA: total adjusted value using simple averages of daily observations over the previous quarter (ie the average calculated over a period of, typically, 90 days).
16	Total net cash outflow: total adjusted value using simple averages of daily observations over the previous quarter (ie the average calculated over a period of, typically, 90 days).

Linkages across templates
Amount in [KM1:1/a] is equal to [CC1:29/a]
Amount in [KM1:2/a] is equal to [CC1:45/a]
Amount in [KM1:3/a] is equal to [CC1:59/a]
Amount in [KM1:4/a] is equal to [CC1:60/a] and is equal to [OV1.29/a]
Amount in [KM1:4a/a] is equal to ([OV1.29/a] – [[OV1.28/a])
Amount in [KM1:5/a] is equal to [CC1:61/a]
Amount in [KM1:6/a] is equal to [CC1:62/a]
Amount in [KM1:7/a] is equal to [CC1:63/a]
Amount in [KM1:8/a] is equal to [CC1:65/a]
Amount in [KM1:9/a] is equal to [CC1:66/a]
Amount in [KM1:10/a] is equal to [CC1:67/a]
Amount in [KM1:12/a] is equal to [CC1:68/a]
Amount in [KM1:13/a] is equal to [LR2:24/a] (only if the same calculation basis is used)
Amount in [KM1:14/a] is equal to [LR2:25/a] (only if the same calculation basis is used)
Amount in [KM1:14b/a] is equal to [LR2:25a/a] (only if the same calculation basis is used)
Amount in [KM1:14c/a] is equal to [LR2:31/a]
Amount in [KM1:14d/a] is equal to [LR2:31a/a]
Amount in [KM1:15/a] is equal to [LIQ1:21/b]
Amount in [KM1:16/a] is equal to [LIQ1:22/b]
Amount in [KM1:17/a] is equal to [LIQ1:23/b]
Amount in [KM1:18/a] is equal to [LIQ2:14/e]
Amount in [KM1:19/a] is equal to [LIQ2:33/e]
Amount in [KM1:20/a] is equal to [LIQ2:34/e]

Template KM2: Key metrics - TLAC requirements (at resolution group level)
Purpose: Provide summary information about total loss-absorbing capacity (TLAC) available, and TLAC requirements applied, at resolution group level under the single point of entry and multiple point of entry (MPE) approaches.
Scope of application: The template is mandatory for all resolution groups of G-SIBs.
Content: Key prudential metrics related to TLAC. Banks are required to disclose the figure as of the end of the reporting period (designated by T in the template below) as well as the previous four quarter-ends (designed by T-1 to T-4 in the template below). When the banking group includes more than one resolution group (MPE approach), this template is to be reproduced for each resolution group.
Frequency: Quarterly.
Format: Fixed.
Accompanying narrative: Banks are expected to supplement the template with a narrative commentary to explain any significant change over the reporting period and the key drivers of such changes.

		a	b	c	d	e
		T	T-1	T-2	2-3	T-4
Resolution group 1
1	Total Loss Absorbing Capacity (TLAC) available
1a	Fully loaded ECL accounting model TLAC available
2	Total RWA at the level of the resolution group
3	TLAC as a percentage of RWA (row1/row2) (%)
3a	Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model RWA (%)
4	Leverage exposure measure at the level of the resolution group
5	TLAC as a percentage of leverage exposure measure (row1/row4) (%)
5a	Fully loaded ECL accounting model TLAC as a percentage of fully loaded ECL accounting model leverage ratio exposure measure (%)
6a	Does the subordination exemption in the antepenultimate paragraph of Section 11 of the FSB TLAC Term Sheet apply?
6b	Does the subordination exemption in the penultimate paragraph of Section 11 of the FSB TLAC Term Sheet apply?
6c	If the capped subordination exemption applies, the amount of funding issued that ranks pari passu with Excluded Liabilities and that is recognised as external TLAC, divided by funding issued that ranks pari passu with Excluded Liabilities and that would be recognised as external TLAC if no cap was applied (%)

Linkages across templates
Amount in [KM2:1/a] is equal to [resolution group-level TLAC1:22/a]
Amount in [KM2:2/a] is equal to [resolution group-level TLAC1:23/a]
Aggregate amounts in [KM2:2/a] across all resolution groups will not necessarily equal or directly correspond to amount in [KM1:4/a]
Amount in [KM2:3/a] is equal to [resolution group-level TLAC1:25/a]
Amount in [KM2:4/a] is equal to [resolution group-level TLAC1:24/a]
Amount in [KM2:5/a] is equal to [resolution group-level TLAC1:26/a]

[KM2:6a/a] refers to the uncapped exemption in Section 11 of the FSB TLAC Term Sheet in which all liabilities excluded from TLAC specified in Section 10 are statutorily excluded from the scope of the bail-in tool and therefore cannot legally be written down or converted to equity in a bail-in resolution. Possible answers for [KM2:6a/a]: [Yes], [No].

[KM2:6b/a] refers to the capped exemption in Section 11 of the FSB TLAC Term Sheet where SAMA may, under exceptional circumstances specified in the applicable resolution law, exclude or partially exclude from bail-in all of the liabilities excluded from TLAC specified in Section 10, and where the relevant authorities have permitted liabilities that would otherwise be eligible to count as external TLAC but which rank alongside those excluded liabilities in the insolvency creditor hierarchy to contribute a quantum equivalent of up to 2.5% RWA (from 2019) or 3.5% RWA (from 2022. Possible answers for [KM2:6b/a]: [Yes], [No].

Amount in [KM2:6c/a] is equal to [resolution group-level TLAC1:14 divided by TLAC1:13]. This only needs to be completed if the answer to [KM2:6b] is [Yes].

Table OVA: Bank risk management approach
Purpose: Description of the bank's strategy and how senior management and the board of directors assess and manage risks, enabling users to gain a clear understanding of the bank's risk tolerance/appetite in relation to its main activities and all significant risks.
Scope of application: The template is mandatory for all banks.
Content: Qualitative information.
Frequency: Annual
Format: Flexible
Banks must describe their risk management objectives and policies, in particular:
(a)	How the business model determines and interacts with the overall risk profile (eg the key risks related to the business model and how each of these risks is reflected and described in the risk disclosures) and how the risk profile of the bank interacts with the risk tolerance approved by the board.
(b)	The risk governance structure: responsibilities attributed throughout the bank (eg oversight and delegation of authority; breakdown of responsibilities by type of risk, business unit etc); relationships between the structures involved in risk management processes (eg board of directors, executive management, separate risk committee, risk management structure, compliance function, internal audit function).
(c)	Channels to communicate, decline and enforce the risk culture within the bank (eg code of conduct; manuals containing operating limits or procedures to treat violations or breaches of risk thresholds; procedures to raise and share risk issues between business lines and risk functions).
(d)	The scope and main features of risk measurement systems.
(e)	Description of the process of risk information reporting provided to the board and senior management, in particular the scope and main content of reporting on risk exposure.
(f)	Qualitative information on stress testing (eg portfolios subject to stress testing, scenarios adopted and methodologies used, and use of stress testing in risk management).
(g)	The strategies and processes to manage, hedge and mitigate risks that arise from the bank's business model and the processes for monitoring the continuing effectiveness of hedges and mitigants.

Template OV1: Overview of RWA
Purpose: To provide an overview of total RWA forming the denominator of the risk-based capital requirements. Further breakdowns of RWA are presented in subsequent parts.
Scope of application: The template is mandatory for all banks.
Content: RWA and capital requirements under Pillar 1. Pillar 2 requirements should not be included.
Frequency: Quarterly.
Format: Fixed.
Accompanying narrative: Banks are expected to identify and explain the drivers behind differences in reporting periods T and T-1 where these differences are significant. When minimum capital requirements in column (c) do not correspond to 8% of RWA in column (a), banks must explain the adjustments made. If the bank uses the internal model method (IMM) for its equity exposures under the market-based approach, it must provide annually a description of the main characteristics of its internal model.

		a	b	c
		RWA		Minimum capital requirements
		T	T-1	T
1	Credit risk (excluding counterparty credit risk)
2	Of which: standardised approach (SA)
3	Of which: foundation internal ratings-based (F-IRB) approach
4	Of which: supervisory slotting approach
5	Of which: advanced internal ratings-based (A-IRB) approach
6	Counterparty credit risk (CCR)
7	Of which: standardised approach for counterparty credit risk
8	Of which: IMM
9	Of which: other CCR
10	Credit valuation adjustment (CVA)
11	Equity positions under the simple risk weight approach and the internal model method during the five-year linear phase-in period
12	Equity investments in funds - look-through approach
13	Equity investments in funds - mandate-based approach
14	Equity investments in funds - fall-back approach
15	Settlement risk
16	Securitisation exposures in banking book
17	Of which: securitisation IRB approach (SEC-IRBA)
18	Of which: securitisation external ratings-based approach (SEC-ERBA), including internal assessment approach (IAA)
19	Of which: securitisation standardised approach (SEC-SA)
20	Market risk
21	Of which: standardised approach (SA)
22	Of which: internal model approach (IMA)
23	Capital charge for switch between trading book and banking book
24	Operational risk
25	Amounts below the thresholds for deduction (subject to 250% risk weight)
26	Output floor applied
27	Floor adjustment (before application of transitional cap)
28	Floor adjustment (after application of transitional cap)
29	Total (1 + 6 + 10 + 11 + 12 + 13 + 14 + 15 + 16 + 20 + 23 + 24 + 25 + 28)

Definitions and instructions
RWA: risk-weighted assets according to the Basel framework and as reported in accordance with the subsequent parts of this standard. Where the regulatory framework does not refer to RWA but directly to capital charges (eg for market risk and operational risk), banks should indicate the derived RWA number (ie by multiplying capital charge by 12.5).

RWA (T-1): risk-weighted assets as reported in the previous Pillar 3 report (ie at the end of the previous quarter).

Minimum capital requirement T: Pillar 1 capital requirements at the reporting date. This will normally be RWA * 8% but may differ if a floor is applicable or adjustments (such as scaling factors) are applied at jurisdiction level.

Row number	Explanation
1	Credit risk (excluding counterparty credit risk): RWA and capital requirements according to the credit risk standard of the Basel framework (SCRE), with the exceptions of RWA and capital requirements related to: (i) counterparty credit risk (reported in row 6); (ii) equity positions (reported in row 11 to 14); (iii) settlement risk (reported in row 15); (iv) securitisation positions subject to the securitisation regulatory framework, including securitisation exposures in the banking book (reported in row 16); and (v) amounts below the thresholds for deduction (reported in row 25).
2	Of which: standardised approach: RWA and capital requirements according to the standardised approach to credit risk (as specified in SCRE5 to SCRE9).
3 and 5	Of which: (foundation/advanced) internal rating based approaches: RWA and capital requirements according to the F-IRB approach and/or A-IRB approach (as specified in SCRE10 to SCRE16 with the exception of SCRE13).
4	Of which: supervisory slotting approach: RWA and capital requirements according to the supervisory slotting approach (as specified in SCRE13).
6 to 9	Counterparty credit risk: RWA and capital charges according to the counterparty credit risk chapters of the Basel framework (SCCR3 to SCCR10).
10	Credit valuation adjustment: RWA and capital charge requirements according to SCCR11.
11	Equity positions under the simple risk weight approach and internal models method: the amounts in row 11 correspond to RWA where the bank applies the simple risk weight approach or the internal model method, which remain available during the five-year linear phase-in arrangement as specified in SCRE17.2. Equity positions under the PD/LGD approach during the five-year linear phase-in arrangement should be reported in row 3. Where the regulatory treatment of equities is in accordance with the standardised approach, the corresponding RWA are reported in Template CR4 and included in row 2 of this template.
12	Equity investments in funds - look-through approach: RWA and capital requirements calculated in accordance with SCRE24.
13	Equity investments in funds - mandate-based approach: RWA and capital requirements calculated in accordance with SCRE24.
14	Equity investments in funds - fall-back approach: RWA and capital requirements calculated in accordance with SCRE24.
15	Settlement risk: the amounts correspond to the requirements in SCRE25.
16 to 19	Securitisation exposures in banking book: the amounts correspond to capital requirements applicable to the securitisation exposures in the banking book. The RWA amounts must be derived from the capital requirements (which include the impact of the cap in accordance with SCRE18.50 to SCRE18.55, and do not systematically correspond to the RWA reported in Templates SEC3 and SEC4, which are before application of the cap).
20	Market risk: the amounts reported in row 20 correspond to the RWA and capital requirements in the market risk standard (MAR), with the exception of amounts that relate to CVA risk (as specified in SCCR11 and reported in row 10). They also include capital charges for securitisation positions booked in the trading book but exclude the counterparty credit risk capital charges (reported in row 6 of this template). The RWA for market risk correspond to the capital charge times 12.5.
21	Of which: standardised approach: RWA and capital requirements according to the market risk standardised approach, including capital requirements for securitisation positions booked in the trading book.
22	Of which: Internal Models Approach: RWA and capital requirements according to the market risk IMA.
23	Capital charge for switch between trading book and banking book: outstanding accumulated capital surcharge imposed on the bank in accordance with Basel Framework “Risk-based capital requirements” (Boundary between the banking book and trading book) 25.14 and 25.15, when the total capital charge (across banking book and trading book) of a bank is reduced as a result of the instruments being switched between the trading book and the banking book at the bank's discretion and after their original designation. The outstanding accumulated capital surcharge takes into account any adjustment due to run-off as the positions mature or expire, in a manner agreed with SAMA.
24	Operational risk: the amounts corresponding to the minimum capital requirements for operational risk as specified in the operational risk standard (SOPE).
25	Amounts below the thresholds for deduction (subject to 250% risk weight): the amounts correspond to items subject to a 250% risk weight according to SACAP4.4. They include significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation and below the threshold for deduction, after application of the 250% risk weight.
26	Output floor applied: the output floor (expressed as a percentage) applied by the bank in its computation of the floor adjustment value in rows 27 and 28.
27	Floor adjustment (before the application of transitional cap): the impact of the output floor before the application of the transitional cap, based on the output floor applied in row 26, in terms of the increase in RWA.
28	Floor adjustment (after the application of transitional cap): the impact of the output floor after the application of the transitional cap, based on the output floor applied in row 26, in terms of the increase in RWA. The figure disclosed in this row takes into account the transitional cap (if any) applied by SAMA, which will limit the increase in RWA to 25% of the bank's RWA before the application of the output floor.
29	The bank's total RWA.

Linkages across templates
Amount in [OV1:2/a] is equal to [CR4:12/e]
Amount in [OV1:3/a] and [OV1:5/a] is equal to the sum of [CR6: Total (all portfolios)/i]
Amount in [OV1:6/a] is equal to the sum of CCR1:6/f+CCR8:1/b+CCR8:11/b]
Amount in [OV1:16/c] is equal to the sum of [SEC3:1/n + SEC3:1/o + SEC3:1/p + SEC3:1/q] + [SEC4:1/n + SEC4:1/o + SEC4:1/p + SEC4:1/q]
Amount in [OV1:21/c] is equal to [MR1:12/a]
Amount in [OV1:22/c] is equal to [MR2:12]

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