The deduction from capital in respect of a shortfall of the stock of provisions to expected losses under the IRB approach should be made in the calculation of Common Equity Tier 1. The full amount is to be deducted and should not be reduced by any tax effects that could be expected to occur if provisions were to rise to the level of expected losses.

Gain on sale related to securitization transactions

Derecognize in the calculation of Common Equity Tier 1 any increase in equity capital resulting from a securitization transaction, such as that associated with expected future margin income (FMI) resulting in a gain-on- sale.

Cumulative gains and losses due to changes in own credit risk on fair valued financial liabilities

Derecognize in the calculation of Common Equity Tier 1, all unrealized gains and losses that have resulted from changes in the fair value of liabilities that are due to changes in the bank’s own credit risk.

In addition, with regard to derivative liabilities, derecognize all accounting valuation adjustments arising from the bank's own credit risk. The offsetting between valuation adjustments arising from the bank's own credit risk and those arising from its counterparties' credit risk is not allowed.

(BIS has issued its final guidelines (July 2012) titled “Regulatory treatment of valuation adjustments to derivative liabilities - final rule issued by the Basel Committee”. Banks are advised to refer to the aforementioned, these would be regarded as binding by SAMA with respect to capital computation / capital adequacy under Basel III guidelines.

Refer to Paragraph 75, Cumulative gains and losses due to changes in own credit risk on fair valued financial liabilities (Updated in July 2012)