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Updated Financial Institutions Risk-Adjusted Capital Framework Methodology Published

PARIS (S&P Global Ratings) April 30, 2024--S&P Global Ratings today published "Risk-Adjusted Capital Framework Methodology." This article presents our criteria for evaluating the capital adequacy of bank and certain non-bank financial institutions. The criteria apply to banks and certain nonbank financial institutions and financial services companies (including nonoperating holding companies of such groups). These criteria do not apply to insurance companies.

This methodology follows our request for comment (RFC), titled "Request For Comment: Risk-Adjusted Capital Framework Methodology," published Jan. 25, 2024. For the changes between the RFC and the final criteria, as well as a summary of the comments received during the RFC process, see "RFC Process Summary: Risk-Adjusted Capital Framework Methodology."

KEY CHANGES FROM PREVIOUS CRITERIA

The criteria address recently implemented Basel III framework reporting for market risk on trading activities including the introduction of the sensitivities-based and simplified approaches. We also updated our criteria to address the recently implemented Basel III fallback approach applied in computing the regulatory credit valuation adjustment (CVA) charge to which we apply a multiplier.

In addition, we revised the approach for jurisdictions that exempt some asset classes from the regulatory CVA charge by applying a multiplier based on the average proportion of nonexempted counterparties from a large sample of banks unless we believe applying a bank-specific multiplier may be material to our analysis.

IMPACT ON OUTSTANDING RATINGS

We anticipate no rating impact upon implementation of the criteria given that the changes are targeted to a limited aspect of the criteria (market risk on the trading book and CVA charge), for which a very limited number of banks currently apply the revised Basel III reporting. Furthermore, this is not a fundamental change to the criteria.

Fully Superseded Criteria

This report does not constitute a rating action.

The report is available free of charge at https://disclosure.spglobal.com/ratings/en/regulatory/ratings-criteria and to RatingsDirect subscribers at www.capitaliq.com.

Analytical Contacts:Mathieu Plait, Paris + 33 14 420 7364;
mathieu.plait@spglobal.com
Thierry Grunspan, Columbia + 1 (212) 438 1441;
thierry.grunspan@spglobal.com
Matthew B Albrecht, CFA, Englewood + 1 (303) 721 4670;
matthew.albrecht@spglobal.com
Emmanuel F Volland, Paris + 33 14 420 6696;
emmanuel.volland@spglobal.com
Methodology Contacts:Michelle M Brennan, London + 44 20 7176 7205;
michelle.brennan@spglobal.com
Steven Ader, New York + 1 (212) 438 1447;
steven.ader@spglobal.com
Analytical Contacts:Mehdi El mrabet, Paris + 33 14 075 2514;
mehdi.el-mrabet@spglobal.com
Guilherme Machado, Sao Paulo + 30399700;
guilherme.machado@spglobal.com
Chizuru Tateno, Tokyo + 81 3 4550 8578;
chizuru.tateno@spglobal.com
Goksenin Karagoz, FRM, Paris + 33.1.44206724;
goksenin.karagoz@spglobal.com
Deepali V Seth Chhabria, Mumbai + 912233424186;
deepali.seth@spglobal.com
Nico N DeLange, Sydney + 61 2 9255 9887;
nico.delange@spglobal.com
Mohamed Damak, Dubai + 97143727153;
mohamed.damak@spglobal.com
Nicolas Malaterre, Paris + 33 14 420 7324;
nicolas.malaterre@spglobal.com
Alejandro Peniche, Madrid 52 55 5081 2874;
alejandro.peniche@spglobal.com
Osman Sattar, FCA, London + 44 20 7176 7198;
osman.sattar@spglobal.com
Methodology Contacts:Marta Castelli, Buenos Aires + 54 11 4891 2128;
marta.castelli@spglobal.com
Terry Sham, CFA, FRM, London + 44 20 71760432;
terry.sham@spglobal.com
Mark Button, London + 44 20 7176 7045;
mark.button@spglobal.com
Nik Khakee, New York + 1 (212) 438 2473;
nik.khakee@spglobal.com
Russell J Bryce, Charlottesville + 1 (214) 871 1419;
russell.bryce@spglobal.com
Media Contact:Jeff Sexton, New York + 1 (212) 438 3448;
jeff.sexton@spglobal.com

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