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Basel ii Accord
Sections 59 to 65 |
3. Claims on
multilateral development banks
(MDBs)
59.
The risk weights applied to claims on MDBs will
generally be based on external
credit
assessments as set out under option 2 for claims
on banks but without the
possibility
of
using the preferential treatment for short-term
claims.
A
0% risk weight will be applied to claims on
highly rated MDBs that fulfil to the Committee’s
satisfaction the criteria
provided
below.
(24)
The
Committee will continue to evaluate eligibility
on a case-by-case basis.
The
eligibility
criteria for MDBs risk weighted at 0%
are:
•
very
high quality long-term issuer ratings, i.e. a
majority of an MDB’s
external
assessments
must be AAA;
•
shareholder structure
is comprised of a significant proportion of
sovereigns with
long-term
issuer credit assessments of AA- or better, or
the majority of the MDB’s
fund-raising
are in the form of paid-in equity/capital and
there is little or no leverage;
•
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;
•
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,
•
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.
(24) MDBs currently eligible for a
0% risk weight are: the World Bank Group
comprised of the International Bank for
Reconstruction and Development (IBRD) and the
International Finance Corporation (IFC), the
Asian Development Bank (ADB), the African
Development Bank (AfDB), the European Bank for
Reconstruction and Development (EBRD), the
Inter-American Development Bank (IADB), the
European Investment Bank (EIB), the European
Investment Fund (EIF), the Nordic Investment
Bank (NIB), the Caribbean Development Bank
(CDB), the Islamic Development Bank (IDB), and
the Council of Europe Development Bank
(CEDB).
4.
Claims on
banks
60.
There are two options for claims on banks.
National supervisors will apply
one
option
to all banks in their jurisdiction. No claim on
an unrated bank may receive a risk weight lower
than that applied to claims on its sovereign of
incorporation.
61.
Under the first option, all banks incorporated
in a given country will be assigned
a
risk
weight one category less favourable than that
assigned to claims on the sovereign of
that
country.
However,
for claims on banks in countries with sovereigns
rated BB+ to B- and on
banks
in unrated countries the risk weight will be
capped at 100%.
62.
The second option bases the risk weighting on
the external credit assessment of
the
bank
itself with claims on unrated banks being
risk-weighted at 50%.
Under
this option, a preferential risk weight that is
one category more favourable may be applied to
claims with an original
maturity
(25) of
three months or less, subject to a floor of 20%.
This treatment will be
available to both rated and unrated banks, but
not to banks risk weighted at 150%.
(25) Supervisors should ensure that
claims with (contractual) original maturity
under 3 months which are expected to be rolled
over (i.e. where the effective maturity is
longer than 3 months) do not qualify for this
preferential treatment for capital adequacy
purposes.
63.
The two options are summarised in the tables
below.
(26)
Short-term claims in Option 2 are defined as
having an original maturity of three months or
less. These tables do not reflect the potential
preferential risk weights for domestic currency
claims that banks may be allowed to apply based
on paragraph 64.
64.
When the national supervisor has chosen to apply
the preferential treatment for
claims
on the sovereign as described in paragraph 54,
it can also assign, under both
options
1
and 2, a risk weight that is one category less
favourable than that assigned to claims on
the
sovereign,
subject to a floor of 20%, to claims on banks of
an original maturity of 3 months
or
less
denominated and funded in the domestic
currency.
5.
Claims on securities
firms
65.
Claims on securities firms may be treated as
claims on banks provided these
firms
are
subject to supervisory and regulatory
arrangements comparable to those under
this
Framework (including,
in particular, risk-based capital
requirements).27 Otherwise
such
claims
would follow the rules for claims on
corporates.
(27)
That is, capital requirements that are
comparable to those applied to banks in this
Framework. Implicit in the meaning of the word
“comparable” is that the securities firm (but
not necessarily its parent) is subject to
consolidated regulation and supervision with
respect to any downstream
affiliates.
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