Minimum Capital Requirements for Credit Risk

Exposures to domestic PSEs will be risk-weighted based on the external rating of the Saudi sovereign external rating Risk weight table for PSEs Based on external rating of sovereign Table 2 External rating of the sovereign AAA to AA– A+ to A– BBB+ to BBB– BB+ to B– Below B– Unrated Risk weight 20% 50% 100% 100% 150% 100% 7.7 Foreign PSEs, including PSEs in GCC countries, shall be assigned a risk weight based on the external rating of the PSE respective country’s sovereign rating. Exposures to Multilateral Development Banks (MDBs) 7.8 For the purposes of calculating capital requirements, a Multilateral Development Bank (MDB) is an institution created by a group of countries that provides financing and professional advice for economic and social development projects. MDBs have large sovereign memberships and may include both developed and /or developing countries. Each MDB has its own independent legal and operational status, but with a similar mandate and a considerable number of joint owners. 7.9 A 0% risk weight will be applied to exposures to specified MDBs that are recognized by the Basel Committee for Banking Supervision (BCBS) for fulfilling the following eligibility criteria: 1. very high-quality long-term issuer ratings, i.e. a majority of an MDB’s externalratings must be AAA; 4 2. either the shareholder structure comprises a significant proportion of sovereigns with long-term issuer external ratings of AA– or better, or the majority of the MDB’s fund-raising is in the form of paid-in equity/capital and there is little or no leverage; 3. strong shareholder support demonstrated by the amount of paid-in capital contributed by the shareholders; the amount of further capital the MDBs have the right to call, if required, to repay their liabilities; and continued capital contributions and new pledges from sovereign shareholders; 4. adequate level of capital and liquidity (a case-by-case approach is necessary in order to assess whether each MDB’s capital and liquidity are adequate); and, 5. strict statutory lending requirements and conservative financial policies, which would include among other conditions a structured approval process,internal creditworthiness and risk concentration limits (per country, sector, and individual exposure and credit category), large exposures approval by the board or a committee of the board, fixed repayment schedules, effective monitoring of use of proceeds, status review process, and rigorous assessment of risk and provisioning to loan loss reserve. 7.10 The specified MDBs eligible for a 0% risk weight are as follows. This list is subject to review by SAMA from time to time. 1. The World Bank Group comprising the International Bank for Reconstruction and Development; 2. The International Finance Corporation; 3. The Multilateral Investment Guarantee Agency and the International Development Association; 4. The Asian Development Bank; 5. The African Development Bank; 6. The European Bank for Reconstruction and Development; 7. The Inter-American Development Bank; 8. The European Investment Bank, 9. The European Investment Fund; 10. The Caribbean Development Bank, 11. The Islamic Development Bank 12. The Nordic Investment Bank; 13. The Council of Europe Development Bank; 14. The International Finance Facility for Immunization; and 15. The Asian Infrastructure Investment Bank.