• BANK Part 5.3 BANK Part 5.3 Management of exposures

    Amended by QFCRA RM/2015-3 (as from 1st January 2016).

    • BANK 5.3.1 Calculating exposures

      (1) Large exposure means a gross exposure to a counterparty or connected counterparties that is 10% or more of the firm's regulatory capital.

      Note Regulatory capital is defined in rule 3.2.7.
      (2) In this rule:

      gross exposure to a counterparty or connected counterparties is the total of the following exposures:
      (a) on-balance-sheet and off-balance-sheet exposures;
      (b) debt securities held by the firm;
      (c) equity exposures.
      (3) In calculating the gross exposure, include:
      (a) the outstanding balances of all loans and advances, including balances with other banks;
      (b) holdings of debt or equity securities;
      (c) unused off-balance-sheet commitments, whether revocable or irrevocable; and
      (d) the credit equivalent amounts of all market-related transactions (calculated in accordance with rule 4.4.11, or Division 4.5.E if netting applies).
      (4) However, in calculating the gross exposure, do not include:
      (a) claims, equity investments and other exposures deducted from the firm's capital;
      (b) exposures arising in the course of settlement of market-related contracts; and
      (c) exposures that have been written off.
      (5) For this Part:
      (a) a banking business firm must treat an exposure as reduced (to the extent permitted by Part 4.5) by any applicable CRM technique; and
      (b) a banking business firm that is part of a financial group may offset intragroup amounts due to other deposit takers within the group.
      Amended by QFCRA RM/2017-2 (as from 1st April 2017).

    • BANK 5.3.2 Policies — large exposures

      A banking business firm’s large exposure policy must include:

      (a) exposure limits, commensurate with the firm’s risk tolerance, risk profile and capital, for:
      (i) categories of counterparties (for example, sovereigns, other authorised firms and other financial entities, corporate and individual borrowers);
      (ii) connected counterparties;
      (iii) particular industries or sectors;
      (iv) particular countries; and
      (v) asset classes (for example, property holdings);
      (b) the circumstances in which the exposure limits may be exceeded;
      (c) the procedures for approving exceptions to, and deviations from, exposure limits or policies; and
      (d) the procedures for identifying, measuring, managing and reporting large exposures.
      Derived from QFCRA RM/2014-2 (as from 1st January 2015).

    • BANK 5.3.3 Limits on exposures

      (1) A banking business firm must not become exposed without limit to a single counterparty. The firm must not give a general guarantee of the obligations of a counterparty.
      (2) The total of the firm's net exposures to any 1 counterparty or any 1 group of connected counterparties must not exceed 25% of the firm's regulatory capital.
      (2A) The total of all of the firm's net large exposures must not exceed 800% of that capital.

      Note Subrules (2) and (2A) do not apply to a branch. A branch is not required to hold regulatory capital — see rule 3.1.2(1).
      (3) A banking business firm may apply to the Regulatory Authority for approval for a proposed exposure in excess of the limits set out in this Chapter. An approval will be granted only in exceptional circumstances and only after the firm satisfies the authority that the proposed exposure does not expose the firm to excessive risk.
      (4) The Regulatory Authority may impose a higher capital ratio on the firm to compensate for the additional risk associated with the proposed exposure.
      Amended by QFCRA RM/2015-3 (as from 1st January 2016).

    • BANK 5.3.4 BANK 5.3.4 Limits on exposures — Islamic financial managers [Deleted]

      Deleted by QFCRA RM/2015-3 (as from 1st January 2016).

      • BANK 5.3.4 Guidance [Deleted]

        Deleted by QFCRA RM/2015-3 (as from 1st January 2016).

    • BANK 5.3.5 Obligation to measure

      (1) A banking business firm must measure, classify and make provision for each large exposure individually.
      (2) The firm must immediately notify the Regulatory Authority if the firm is concerned that risk concentrations or large exposures might significantly affect its capital adequacy. The notice must describe the firm’s proposed measures to address its concerns.
      Derived from QFCRA RM/2014-2 (as from 1st January 2015).