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For high-volatility commercial real estate (HVCRE) exposures, banks that do not meet the requirements for estimation of PD, or did not obtain SAMA’s approval to implement the foundation or advanced approaches to HVCRE, must map their internal grades to five supervisory categories, each of which is associated with a specific risk weight. The slotting criteria on which this mapping must be based are the same as those for IPRE, as provided in paragraph 13.14. The risk weights associated with each supervisory category are shown in table 21 below:
Table 21
Supervisory categories and unexpected loss (UL) risk weights for other SL exposures
Strong
Good
Satisfactory
Weak
Default
95%
120%
140%
250%
0%
13.6
As indicated in paragraph 13.3, each supervisory category broadly corresponds to a range of external credit assessments.
13.7
SAMA may allow banks to assign preferential risk weights of 70% to “strong” exposures, and 95% to “good” exposures, provided they have a remaining maturity of less than 2.5 years or SAMA determines that banks’ underwriting and other risk characteristics are substantially stronger than specified in the slotting criteria for the relevant supervisory risk category.
