South African banks operate under one of the more rigorously assessed implementations of the Basel framework on the continent — the country’s counterparty credit risk rules have been judged compliant with the Basel standard by the Basel Committee’s own review programme. That bar is still rising. The finalisation of the post-crisis reforms — Basel 3.1, widely called the endgame — is phasing in internationally through 2028, bringing a revised output floor that forces banks using internal models to also compute risk-weighted assets on the standardised basis, and the Fundamental Review of the Trading Book reshapes how market risk in the trading book is capitalised.

For any bank with a derivatives book, the standardised approach to counterparty credit risk (SA-CCR) now governs how exposure at default is measured — replacing the old current-exposure method with a more risk-sensitive calculation that recognises netting and margin but, on the Basel Committee’s own estimate, raises counterparty capital requirements materially under full implementation. Exposure at default is built from replacement cost and potential future exposure, aggregated across ISDA netting sets and offset by collateral. Every one of those components is both a modelling decision and a data question.

The Prudential Authority reinforces this with a hard governance line: banks using internal models must obtain prior written approval before changing them, and validation documentation must be presented to the regulator. In other words, the model in production must be demonstrably the model that was validated. For a bank’s risk and finance functions, this is the defining reality of the sector — provisions, capital ratios, and trading-book charges live or die on assumptions and analytics that must be traceable, defensible, and stable under scrutiny.