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SA
Standardised Approach to Credit Risk.
Scenario Analysis
Changing the value of one or more parameters that affect the financial position of a firm to determine the effect on the firm's business.
Securitisation
The pooling and repackaging of cash income producing financial assets into securities that can then be sold to investors.
Section 39 Report
A report that was previously commissioned by the Bank of England / FSA under Section 39 of the Banking Act 1987, now superseded by Section 166 of the Financial Services and Markets Act 2000 (see Section 166 Report).
Section 166 Report
A report commissioned by the FSA to address a particular regulatory need identified by the FSA relating to a regulated financial services business under Section 166 of the Financial Services and Markets Act 2000.
Segmentation
Under the retail IRB approach, banks are required to break down, or segment, a portfolio covered by a rating system into a number of pools that have similar risk characteristics.
Sensitivity Analysis
Simulation analysis in which one or more key quantitative assumptions are changed to assess their effect on the final outcome. In comparison, stress testing considers whole scenarios that draw on numerous qualitative assumptions to determine the overall potential impact.
SFT
Securities financing transaction.
SLRP
SME
Small or medium-sized enterprise.
Solo Basis
The assessment and reporting of a firm's capital adequacy on an individual (unconsolidated) basis.
Solo capital requirements
Calculation of capital requirements at the level of an individual bank.
Solo Consolidated Basis
The assessment and reporting of capital adequacy for a firm and its subsidiaries on a consolidated basis, treating the group as a single entity. In order to solo consolidate, the bank must have significant management control of the subsidiary.
Solvency Ratios Directive
The 1989 Directive (89/647/EEC) that implemented the Basel 1 Accord in the EU. The Directive is no longer in force as it was incorporated into the Consolidated Banking Directive.
Sovereign exposures
Loans and other commercial activities that are made to a country's central government or its departments and agencies.
Specialised Lending
The collective term under the IRB framework for several sub-categories of wholesale lending whose repayment is highly dependent on the performance of the underlying collateral. Where banks are unable to calculate the IRB inputs, they should instead be allocated to one of five quality grades, each of which has a specific risk weight.
SREP
Specialised Lending
The collective term under the IRB framework for several sub-categories of wholesale lending whose repayment is highly dependent on the performance of the underlying collateral. Where banks are unable to calculate the IRB inputs, they should instead be allocated to one of five quality grades, each of which has a specific risk weight.
STA
The Standardised Approach to Operational Risk. (Note: The FSA tend to use TSA as the acronym for this term).
Standardised Approach to Credit Risk (SA)
The most basic approach to credit risk under Basel II. This approach is similar to Basel I requirements, with regulatory capital requirements calculated by multiplying the value of a bank's exposure by an appropriate risk weight. The risk weights under the revised standardised approach are calculated by using external credit ratings that map onto defined credit steps.
Standardised Approach to Market Risk
The most basic approach available for the calculation of regulatory capital requirements for market risk. This approach is based on a more formulaic approach with supervisory determined parameters. These requirements are mostly unchanged from those adopted in the 1996 Market risk amendment to the Basel Accord (Basel 1).
Standardised Approach to Operational Risk
(STA or TSA)
(STA or TSA)
The intermediate of the three approaches to operational risk. Under this approach regulatory capital requirements are calculated by taking a three-year average of gross income for eight defined business lines. Each of these eight income measures are then multiplied by a given risk weight (between 12 and 18 per cent) and then summed together to arrive at an overall capital requirement.
Stress Testing
Determination of the resilience of a business model by considering a variety of severe yet plausible scenarios that give rise to unexpected demands on capital and/or liquidity and could result in financial distress. Stress testing is an important tool in the evaluation of the potential impact of a specific set of adverse conditions on the firm's business.
Subconsolidated requirements
Calculation of capital requirements for a consolidated sub-group within a larger group.
Subequivalence
Areas where a supervisory authority sets lower standards than those required by the revised Accord and/or Capital Requirements Directive.
Superequivalence
Areas where a supervisory authority sets higher standards than those required by the revised Accord and/or Capital Requirements Directive.
Supervisor
The national authority responsible for regulatory supervision of the finance and banking sector. The supervisor in the UK is the FSA.
Supervisory Liquidity Review Process
The process under which the adequacy of a firm’s liquidity resources is assessed by the FSA (the supervisor).
Supervisory Review and Evaluation Process
The process which the FSA will use to review and evaluate the bank's risk profile, capital adequacy and ICAAP, identify any weaknesses or inadequacies and take prudential measures and other supervisory actions, if necessary.
Supervisory values
Parameters for use in internal models that are predetermined by the supervisor rather than the banks own internal estimation. These values are applied consistently across the industry for all banks adopting the approach.
Supplementary Capital
See Tier 2 Capital.
Swap
The exchange of one security for another, most commonly a currency swap or an interest rate swap.
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