| (d) |
Matters relating to foreign exchange risk, including gold |
| (i) |
Based on the relevant requirements specified in this paragraph (d), a bank that adopted the standardised approach for the measurement of the bank's exposure to market risk shall in the calculation of the bank's minimum required amount of capital and reserve funds relating to foreign exchange risk, including gold, separately calculate— |
| (A) |
the bank's exposure in respect of each relevant single foreign currency; |
| (B) |
the risks inherent in the bank's mix of all relevant long and short positions in different foreign currencies. |
| (ii) |
Matters relating to exposure in each single foreign currency |
In respect of each relevant foreign currency, a bank that adopted the standardised approach for the measurement of the bank's exposure to market risk shall calculate its net open foreign-currency position as the sum of—
| (A) |
the bank's net spot position, that is, all relevant asset items less all relevant liability items, including any relevant amount of accrued interest; |
| (B) |
the bank's net forward position, that is, all relevant amounts to be received less all relevant amounts to be paid in respect of any forward foreign exchange transaction or futures transaction, including any currency future and the principal amount relating to a currency swap not included in the spot position; |
| (C) |
any relevant guarantee or similar instrument that is certain to be called, and is likely to be irrecoverable; |
| (D) |
any net future income/expense not yet accrued but already fully hedged; |
| (E) |
any other relevant item representing a profit or loss in foreign currency; |
| (F) |
the net delta equivalent value relating to all relevant foreign currency and gold options, provided that the reporting bank shall either separately calculate the relevant minimum required amount of capital and reserve funds in respect of gamma risk and vega risk in accordance with the relevant requirements specified in the delta-plus approach in paragraph (f)(iii) below or calculate the relevant capital requirements relating to option contracts and their underlying instruments in accordance with one of the other methods and its related requirements specified in paragraph (f) below. |
Provided that—
| (i) |
the bank shall separately report all relevant positions in composite currencies, provided that, in order to measure the reporting banks' open foreign-currency position, the bank may either treat the said currencies as a currency in its own right or split the said currency into its component parts; |
| (ii) |
the bank shall separately report any relevant position in gold; |
| (iii) |
when gold forms part of a forward contract, the bank shall report any relevant interest rate or foreign currency exposure arising from the other leg of the contract in accordance with the relevant requirements specified in this subregulation (7); |
| (iv) |
the bank may treat as a single currency any currency pair that is subject to a legally enforceable inter-governmental agreement in terms of which the respective currencies are linked; |
| (v) |
the reporting bank shall include as a position any accrued interest, that is, interest earned but not yet received, or accrued expenses; |
| (vi) |
the reporting bank may exclude from its calculation any unearned but expected future interest and anticipated expenses unless the said amounts are certain and the bank has entered into a hedge in respect of the said interest or expense item, provided that when the bank includes in its calculation any future income or expense as envisaged in this sub-item (vi) the bank shall consistently include the said amounts in all relevant calculations and not selectively include only expected future flows that reduce the bank's foreign-currency position; |
| (vii) |
in respect of any relevant forward currency or gold position the reporting bank shall value the said position based on current spot market exchange rates instead of forward exchange rates, provided that when the bank reports in its management accounts the net present values of the said forward positions the bank shall use the said net present value in respect of each relevant forward or gold position, which positions shall be discounted using current interest rates and valued based on current spot rates in order to measure the bank's forward currency or gold position; |
| (viii) |
subject to the prior written approval of and such further conditions as may be specified in writing by the Registrar, the bank may exclude from the calculation of its net open foreign-currency positions any structural positions deliberately taken by the bank solely to hedge the bank's capital base against the adverse effects of exchange rate movements, provided that— |
| (aa) |
the said positions shall be of a structural nature, that is, of a non-trading nature; |
| (bb) |
during the remaining life of the relevant assets or other items, the bank shall treat the relevant hedge in a consistent manner; |
| (ix) |
the bank may exclude from its relevant calculation of minimum required capital and reserve funds relating to foreign exchange risk items such as investments in non-consolidated subsidiaries, which investments constitute impairments against the bank's capital and reserve funds; |
| (x) |
subject to the prior written approval of and such further conditions as may be specified in writing by the Registrar, the bank may exclude from its relevant calculation of minimum required capital and reserve funds relating to foreign exchange long-term participations denominated in foreign currency, which participations— |
| (aa) |
are reported in the bank's published accounts at historic cost; |
| (bb) |
shall be deemed to constitute a structural position. |
| (iii) |
Matters relating to a portfolio of foreign currency positions, and gold |
In order to measure a bank's exposure to foreign exchange risk arising from a portfolio of foreign currency positions, and gold, the bank may either apply the shorthand method specified in this subparagraph (iii), in terms of which shorthand method all relevant currencies are treated in an equal manner, or the internal models approach specified in subregulation (8) below, which internal models approach, based on the composition of the bank's portfolio of foreign currency and gold positions, takes into account the bank's actual degree of foreign exchange risk, provided that—
| (A) |
when the reporting bank adopts the shorthand method— |
| (i) |
the bank shall convert into Rand, at the relevant spot rates, the relevant nominal amount or net present value, as the case may be, of the net position calculated in respect of each relevant foreign currency, and gold; |
| (ii) |
the bank's overall net open foreign-currency position shall be deemed to be equal to— |
| (aa) |
the greater of the sum of the bank's net short positions or the sum of the bank's net long positions; plus |
| (bb) |
the bank's net absolute position in gold, that is, the bank's net position in gold irrespective whether the said net position is a long or short position; |
| (iii) |
the bank's required amount of capital and reserve funds shall be equal to eight per cent of the overall net open foreign–currency position calculated in accordance with the requirements specified in sub-item (ii) above; |
| (B) |
subject to the prior written approval of and such further conditions as may be specified in writing by the Registrar a bank doing negligible business in foreign currency and which does not take foreign exchange positions for its own account may be exempted from the capital requirements specified in this paragraph (d) in respect of the said foreign exchange positions, provided that— |
| (i) |
the sum of the bank's gross long positions and gross short positions in all relevant foreign currencies shall at no time exceed 100 per cent of the bank's allocated qualifying capital and reserve funds relating to market risk; and |
| (ii) |
the bank's overall net open foreign-currency position calculated in accordance with the requirements specified in item (A)(ii) above shall at no time exceed 2 per cent of the bank's allocated qualifying capital and reserve funds relating to market risk. |
Contingency Fees Act, 1997
