• BANK 5.2.1 BANK 5.2.1 Concentration risk

    Concentration risk to a banking business firm arises if the firm is exposed to 1 counterparty, or to 2 or more counterparties that are not truly independent of each other, and the total of the exposures to the counterparty or counterparties is large enough to endanger the firm’s liquidity or solvency.

    Derived from QFCRA RM/2014-2 (as from 1st January 2015).

    • BANK 5.2.1 Guidance

      1 Significant sources of concentration risk include:
      (a) concentration of exposures to a single counterparty or connected counterparties;
      (b) concentration of exposures to counterparties in the same industry, sector, region or country; and
      (c) concentration of exposures to counterparties whose financial performance depends on the same activity or commodity.
      2 A concentration of exposures would also arise if a firm accepts collateral or credit protection provided by a single provider.
      Derived from QFCRA RM/2014-2 (as from 1st January 2015).