Entire Section
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 inCategory 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 theSimplified 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 anyCR Exposure in the central government andCentral 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 classECA 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 TradeDirectorate .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 anyCR Exposure to any central government or anyCentral 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 orCentral Bank which is denominated and funded in the local currency of that jurisdiction, anAuthorised 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 anyCR 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 anyCR 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 financialCollateral Simplified Approach (FCSA) in its treatment of recognisedCollateral for the purposes of calculating theCredit RWA for itsExposures booked in itsNon-Trading Book .Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]PIB A4.12.13
(1) For anAuthorised Firm using the FCSA, eligible financialCollateral comprises:(a) cash (as well as certificates of deposit or other similar instruments issued by theAuthorised Firm ) on deposit with theAuthorised Firm ;(b) gold;(c) any debt securities issued by sovereigns (including a central government orCentral 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-fundedcredit-linked notes issued by anAuthorised Firm againstExposures in theNon-Trading Book which fulfil the criteria for eligibleCredit 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 theAuthorised Firm that are held asCollateral at a third-party bank in a non-custodial arrangement and that are pledged or assigned to theAuthorised Firm . This is subject to the pledge or assignment being unconditional and irrevocable. Under the FCSA, the risk weight to be applied to theExposure covered by suchCollateral 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 theTrading Book , eligible financialCollateral includes all instruments which anAuthorised Firm may include in itsTrading 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) theBank for International Settlements, the International MonetaryFund , the EuropeanCentral Bank , and the EuropeanCommission ;(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 theCounterparty .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 , anAuthorised Firm must assign the guaranteed portion the risk weight of the eligible guarantors. The uncovered portion of theExposure must be assigned the risk weight of the underlyingCounterparty .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 ofExposures guaranteed by central governments orCentral Banks of a GCC member country where the guarantee is denominated in the domestic currency of that country, and theExposure 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 retainedFirst Loss Positions and must deduct the full amount from itsCapital Resources .Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]