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  • PIB A4.12 PIB A4.12 The Simplified Approach for Category 2 and 3A Firms

    • PIB A4.12.1

      This section applies only to an Authorised Firm in Category 2 or 3A for the purposes of PIB section 4.7.

      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB A4.12.2

      An Authorised Firm that applies the Simplified Approach must comply with the requirements of PIB chapter 4 with the variations as prescribed below:

      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • Risk Weights

      • Central Government and Central Bank Asset Class

        • PIB A4.12.3

          Under the Simplified Approach, Rules PIB 4.12.4 to PIB 4.12.5 are replaced by Rules PIB A4.12.4 to PIB A4.12.6.

          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

        • PIB A4.12.4 PIB A4.12.4

          Subject to Rules PIB A4.12.5 and PIB A4.12.6, an Authorised Firm must risk-weight any CR Exposure in the central government and Central Bank asset class on the basis of the consensus country risk scores of export credit agencies (referred to in this section as "ECA") participating in the OECD's "Arrangement on Officially Supported Export Credits" and in accordance with the table below.

          Risk weights for the central government and Central Bank asset class

          ECA Risk Scores 0–1 2 3 4 to 6 7
          Risk Weights 0% 20% 50% 100% 150%
          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

          • PIB A4.12.4 Guidance

            The consensus country risk classification for the purpose of the "Arrangement on Officially Supported Export Credits" is published by the OECD. At the time of making of these Rules, the classification was available on the OECD's website (http://www.oecd.org) in the Export Credit Arrangement web-page of the Trade Directorate.

            Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

        • PIB A4.12.5

          An Authorised Firm must apply a 0% risk weight to any CR Exposure to any central government or any Central Bank of a GCC member country, which is denominated in the domestic currency, and funded in the domestic currency of that GCC member country.

          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

        • PIB A4.12.6

          For any CR Exposure to any other central government or Central Bank which is denominated and funded in the local currency of that jurisdiction, an Authorised Firm may apply such risk weights as may be specified by the banking regulator of that jurisdiction.

          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • Bank Asset class

        • PIB A4.12.7

          Under the Simplified Approach, Rules PIB 4.12.10 to PIB 4.12.12 are replaced by the following PIB Rule A4.12.8.

          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

        • PIB A4.12.8

          An Authorised Firm must risk-weight any CR Exposure in the bank asset class on the basis of the consensus ECA country risk scores as referred to in PIB A4.12.4 for the jurisdictions in which they are incorporated, in accordance with the following table:

          CRWs for the bank asset class

          ECA Risk Scores 0–1 2 3 4 to 6 7
          Risk Weights 20% 50% 100% 100% 150%
          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • Corporate Asset Class

        • PIB A4.12.9

          Under the Simplified Approach, Rules PIB 4.12.13 to PIB 4.12.15 are replaced by the following PIB Rule A4.12.10.

          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

        • PIB A4.12.10

          An Authorised Firm must apply a 100% risk weight to any CR Exposure in the corporate asset class.

          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • Credit Risk Mitigation — Collateral

        • PIB A4.12.11

          Under the Simplified Approach, Rules PIB 4.13.5 to PIB 4.13.7 are replaced by the following Rules PIB A4.12.12 to PIB A4.12.14.

          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

        • PIB A4.12.12

          An Authorised Firm may only use the financial Collateral Simplified Approach (FCSA) in its treatment of recognised Collateral for the purposes of calculating the Credit RWA for its Exposures booked in its Non-Trading Book.

          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

        • PIB A4.12.13

          (1) For an Authorised Firm using the FCSA, eligible financial Collateral comprises:
          (a) cash (as well as certificates of deposit or other similar instruments issued by the Authorised Firm) on deposit with the Authorised Firm;
          (b) gold;
          (c) any debt securities issued by sovereigns (including a central government or Central Bank) of a jurisdiction that that has an ECA country risk score of 4 or better; and
          (d) any debt securities issued by a PSE that is treated as a sovereign and is of a jurisdiction that has an ECA country risk score of 4 or better.
          (2) Cash-funded credit-linked notes issued by an Authorised Firm against Exposures in the Non-Trading Book which fulfil the criteria for eligible Credit Derivatives must be treated as cash collateralised transactions.
          (3) Cash, mentioned in (1)(a) includes cash on deposit, certificates of deposit or other similar instruments issued by the Authorised Firm that are held as Collateral at a third-party bank in a non-custodial arrangement and that are pledged or assigned to the Authorised Firm. This is subject to the pledge or assignment being unconditional and irrevocable. Under the FCSA, the risk weight to be applied to the Exposure covered by such Collateral must be the risk weight of the third-party bank.
          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

        • PIB A4.12.14

          In the case of any Counterparty Risk Exposures in Rules PIB A4.12.12 and PIB A4.12.13, arising from an SFT which is included in the Trading Book, eligible financial Collateral includes all instruments which an Authorised Firm may include in its Trading Book.

          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • Credit Risk Mitigation — Guarantees

        • PIB A4.12.15

          Under the Simplified Approach, Rules PIB 4.13.9 and PIB 4.13.10 are replaced by the following Rules PIB A4.12.16 to PIB A4.12.19.

          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

        • PIB A4.12.16

          An Authorised Firm may recognise guarantees provided by the following eligible guarantors:

          (a) the Bank for International Settlements, the International Monetary Fund, the European Central Bank, and the European Commission;
          (b) the MDBs referred to in PIB Rule 4.12.8;
          (c) PSEs; and
          (d) other entities eligible for a CRW of 20% or better and with a lower risk weight than the Counterparty.
          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

        • PIB A4.12.17

          For the purpose of calculating the risk weight of a guaranteed Exposure, an Authorised Firm must assign the guaranteed portion the risk weight of the eligible guarantors. The uncovered portion of the Exposure must be assigned the risk weight of the underlying Counterparty.

          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

        • PIB A4.12.18

          An Authorised Firm can apply a 0% risk weight to any portions of Exposures guaranteed by central governments or Central Banks of a GCC member country where the guarantee is denominated in the domestic currency of that country, and the Exposure is funded in that same domestic currency.

          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

        • PIB A4.12.19

          An Authorised Firm must treat any materiality thresholds on payments below which no payment will be made in the event of loss as retained First Loss Positions and must deduct the full amount from its Capital Resources.

          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]