Minimum Capital Requirements for Market Risk

For delta CSR non-securitisations, buckets are set along two dimensions – credit quality and sector – as set out in Table 3. The CSR non-securitisation sensitivities or risk exposures should first be assigned to a bucket defined before calculating weighted sensitivities by applying a risk weight. Buckets for delta CSR non-securitisations Table 3 Bucket number Credit quality Sector 1 Investment grade (IG) Sovereigns including central banks, multilateral development banks 2 Local government, government-backed non-financials, education, public administration 3 Financials including government-backed financials 4 Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying 5 Consumer goods and services, transportation and storage, administrative and support service activities 6 Technology, telecommunications 7 Health care, utilities, professional and technical activities 8 Covered bonds 25 9 High yield (HY) & non-rated (NR) Sovereigns including central banks, multilateral development banks 10 Local government, government-backed non-financials, education, public administration 11 Financials including government-backed financials 12 Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying 13 Consumer goods and services, transportation and storage, administrative and support service activities 14 Technology, telecommunications 15 Health care, utilities, professional and technical activities 16 Other sector 26 17 IG indices 18 HY indices Consistent with the treatment of external ratings under SAMA Minimum Capital Requirements for Credit Risk paragraphs 8.10 and 8.12 , if there are two ratings which map into different risk weights, the higher risk weight should be applied. If there are three or more ratings with different risk weights, the ratings corresponding to the two lowest risk weights should be referred to and the higher of those two risk weights will be applied. Consistent with the treatment where there are no external ratings, banks may, subject to SAMA approval: - For the purpose of assigning delta CSR non-securitisation risk weights, map the internal rating to an external rating, and assign a risk weight corresponding to either “investment grade” or “high yield” in [7.51]; - For the purpose of assigning default risk weights under the DRC requirement, map the internal rating to an external rating, and assign a risk weight corresponding to one of the seven external ratings in the table included [ 8.24 ]; or - Apply the risk weights specified in [7.51] and [8.24] for unrated/non-rated categories. 7.52 To assign a risk exposure to a sector, banks must rely on a classification that is commonly used in the market for grouping issuers by industry sector. (1) The bank must assign each issuer to one and only one of the sector buckets in the table under [7.51]. (2) Risk positions from any issuer that a bank cannot assign to a sector in this fashion must be assigned to the other sector (ie bucket 16). 7.53 For calculating weighted sensitivities, the risk weights for buckets 1 to 18 are set out in Table 4. Risk weights are the same for all tenors (ie 0.5 years, 1 year, 3 years, 5 years, 10 years) within each bucket: Risk weights for buckets for delta CSR non-securitisations Risk weights for buckets for delta CSR non-securitisations Table 4 Bucket number Risk weight 1 0.5% 2 1.0% 3 5.0% 4 3.0% 5 3.0% 6 2.0% 7 1.5% 8 2.5% 27 9 2.0% 10 4.0% 11 12.0% 12 7.0% 13 8.5% 14 5.5% 15 5.0% 16 12.0% 17 1.5% 18 5.0%