| 5.7 | The standardized approaches to be used to calculate the base of the output floor referenced in paragraph 5.3 (2) are as follows:
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| | (1) | The standardized approach for credit risk.
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| | (2) | The bank's nominated approach for equity investments in funds.
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| | (3) | For securitization exposures in the banking book and when determining the default risk charge component for securitization exposures in the trading book:
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| | | (a) | if a bank does not use SEC-IRBA or SEC-IAA, its nominated approach; or
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| | | (b) | if a bank does use SEC-IRBA or SEC-IAA, then the SEC-ERBA, SEC- SA or a risk-weight of 1250% as determined per the hierarchy of approaches.
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| | (4) | For counterparty credit risk exposure measurement:
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| | | (a) | if a bank does not use IMM or the VaR models approach, then its nominated approach; or
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| | | (b) | if a bank does use IMM or the VaR models approach, then the SA-CCR or the comprehensive approach.
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| | (5) | For market risk:
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| | | (a) | If a bank uses the IMA for market risk, then the standardized approach for market risk; or
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| | | (b) | If a bank does not use the IMA for market risk, then its nominated approach.
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| | (6) | The bank's nominated approach for CVA risk.
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| | (7) | The standardized approach for operational risk.
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| 5.8 | As per paragraph 5.7 above, the following approaches are not permitted to be used, directly or by cross reference,1 in the calculation of the base of the output floor:
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| | (1) | IRB approach to credit risk;
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| | (2) | SEC-IRBA;
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| | (3) | IMA for market risk;
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| | (4) | VaR models approach to counterparty credit risk; and
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| | (5) | IMM for counterparty credit risk.
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| 5.9 | SAMA may review the level of the incremental increase for all banks. In addition, SAMA may also apply a cap on the incremental increase during the phase-in period on case-by-case basis. In this regard, banks must submit an application to SAMA with supporting justification for applying the cap on the incremental increase.
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| 5.10 | The output floor will be implemented as of 1 January 2023, the required calibration percentage will gradually increase as following:
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