BANK 5.1.2 Concept of connected parties

(1) The concept of parties being connected to one another is used in these rules in relation to counterparties or issuers with which a banking business firm has exposures. Connected counterparties are the basis for the measurement of concentration risk and large exposures.
(2) In contrast, the concept of parties being related to the banking business firm (which is discussed with credit risk in Chapter 4) is primarily used in relation to the requirement that the firm's transactions be at arm's length.
(3) It is of course possible for a firm's related parties to be connected counterparties (such as when the firm has exposures to them).

Note For purposes of concentration risk, the firm's exposure to connected counterparties (whether related or not) is taken to be a single risk.
Derived from QFCRA RM/2014-2 (as from 1st January 2015).