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5. Regulatory Treatment of a Bank's and its clients' Exposures to CCPs
Effective from Jan 31 2025 - Jan 25 2020 To view other versions open the versions tab on the right
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Capital Requirements:
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Firstly, Qualifying CCP (QCCP):
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Where a bank acts as a clearing member of a CCP for its own purposes, a risk weight of 2% must be applied to the bank's trade exposure to the CCP in respect of derivatives transactions.
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Where the bank, as a clearing member, offers clearing services to clients, the 2% risk weight also applies to the clearing member's trade exposure to the CCP that arises when the clearing member is obligated to reimburse the client for any losses suffered due to changes in the value of its transactions in the event that the CCP defaults.
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Where a client is not protected from losses in the case that the clearing member and another client of the clearing member jointly default or become jointly insolvent but all other conditions relating to offsetting and default (as stated in circular no. 371000101116 dated 15/09/1437AH) are met, a risk weight of 4% will apply to the client's exposure to the clearing member, or to the higher-level client, respectively.
Banks must apply the standardized approach for credit risk, according to the category of the counterparty, to their trade exposure to a non-QCCP.
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For a default fund, a risk weight of 1250% will be applied. For the purposes of this paragraph, the default fund contributions of such banks will include both the funded and the unfunded contributions which are liable to be paid should the CCP so require.
Banks' exposures to QCCPs related to clearing activities are exempted from the large exposures framework. However, these exposures are subject to the regulatory reporting requirements as defined in the rules mentioned above.
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In the case of non-QCCPs, banks must measure their exposures as a sum of both the clearing exposures and other exposures as described in rules mentioned above, and must meet the general large exposure limit of 25% of the eligible capital base.
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Leverage Ratio:
Where a bank acting as clearing member offers clearing services to clients, the clearing member's derivative trade exposures to the CCP that arise when the clearing member is obligated to reimburse the client for an)/ losses suffered due to changes in the value of its transactions in the event that the CCP defaults must be captured by applying the same treatment that applies to any other type of derivative transaction. Therefore, this will be included in the exposure measure in the leverage ratio calculation. (For further guidance, refer to SAMA circular No. 351000133367 dated 29/10/1435AH and circular No. 351000155075 dated 28/12/1435AH).
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Basel Reporting:
Banks must use SAMA Q17 - Template to report their risks and exposures to the CCP in the following cells:
Sheet
Cell
Description
Q17.2
$B$27
Exposure amount for contributions to the default fund of a Domestic CCP
Q17.2
$B$28
Domestic QCCP
Q17.2
$B$29
Foreign QCCP
Q17.2
$B$68
Risk Relating to CCP
Q17.4
$A$12
Of which: Centrally cleared through a Domestic QCCP
QI 7.4
SA513
Of which: Centrally cleared through a Foreign QCCP
Q17.4
$A$16
2%
QI 7.4
$A$17
4%
Q17.5
$A$26
Centrally cleared through a Domestic QCCP
Q17.5
$A$27
Centrally cleared through a Foreign QCCP
QI 7.5.3
$A$26
Centrally cleared through a Domestic QCCP
QI 7.5.3
SA$27
Centrally cleared through a Foreign QCCP
QI 7.9
$C$127
Risk Relating to CCP
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ICAAP and ILAAP:
Banks must capture an)/ risks arising from their CCP activities in the ICAAP and ILAAP documents in line with SAMA ICAAP and ILAAP rules issued via circulars No. 58514.BCS.27835 dated. 15/11/2011 and 381000120488, dated 03/12/1438AH. Special attention should be paid in terms of concentration risks if an)/, arising from a CCP.
