RBI Circular on Guidelines on Large Exposures Framework for Banks
RBI released a circular on the guidelines on large exposures framework for banks in India. The large exposures framework became effective from April 01, 2019. Banks must apply the large exposures framework at both the consolidated (Group) and solo levels.
According to the circular, after due consideration of the representations received from stakeholders, it has been decided as under:
- Non-centrally cleared derivatives exposures will be outside the purview of exposure limits until April 01, 2020. However, banks must compute these exposures separately and report to the Department of Banking Regulation on quarterly basis.
- For the purpose of reckoning exposure limits under large exposures framework, an Indian branch of a foreign global systemically important banks (G-SIB) will be considered as any other Indian bank and can accordingly take exposure up to 25% of its tier I capital on another non-GSIB in India.
- The interbank exposure limit of an Indian branch of a foreign G-SIB with its Head Office will be 20% of its tier I capital in India.
- The eligible capital base for the purpose of large exposures framework will be the effective amount of tier 1 capital fulfilling the criteria defined in the "Master Circular on Basel III – Capital Regulation" dated July 01, 2015 (as amended from time to time) as per the last audited balance sheet. However, the infusion of capital under tier I after the published balance sheet date may also be taken into account for the purpose of large exposures framework. Banks shall obtain an external auditor’s certificate on completion of the augmentation of capital and submit the same to RBI (Department of Banking Supervision) before reckoning the additions to capital funds.
- For Indian banks, profits accrued during the year, subject to provisions contained in para 4.2.3.1 (vii) of "Master Circular on Basel III – Capital Regulation," will also be reckoned as tier I capital for the purpose of large exposures framework.
- No additional time shall be given to banks that are in breach of specified interbank limits with other banks or with their Head Offices, to bring their exposures within limit.
To align the exposure norms for Indian banks with the BCBS standards, and based on comments and feedback received on the discussion paper on the large exposures framework, a draft large exposures framework was issued on August 25, 2016 for public comments. After examining the comments/feedback received from stakeholders on the draft proposals, final guidelines were issued in December 2016, with April 01, 2019 being the effective date.
Effective Date: April 01, 2019
Keywords: Asia Pacific, India, Banking, Large Exposures, G-SIB, Tier 1 Capital, Basel III, Regulatory Capital, Credit Risk, Concentration Risk, RBI
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
CPMI and IOSCO Report on Implementation Monitoring of PFMI in USRelated Articles
APRA Publishes Results of Climate Risk Self-Assessment Survey
The Australian Prudential Regulation Authority (APRA) has published the findings of its latest climate risk self-assessment survey conducted across the banking, insurance, and superannuation industries.
ACPR Publishes Updates Related to CRD IV and Covered Bonds
The French Prudential Supervisory Authority (ACPR) published a notice related to the methods for calculating and publishing prudential ratios under the Capital Requirements Directive (CRD IV) and the minimum requirement for own funds and eligible liabilities (MREL).
BIS Paper Contributes to Debate on Regulating NBFIs and Big Techs
The Financial Stability Institute (FSI) of the Bank for International Settlements recently published a paper proposing a framework for classifying financial stability regulation as either entity-based or activity-based.
EIOPA Publishes Guidance on Climate Change Scenarios in ORSA
The European Insurance and Occupational Pension Authority (EIOPA) published the risk dashboard based on Solvency II data and the final version of the application guidance on climate change materiality assessments and climate change scenarios in the Own Risk and Solvency Assessment (ORSA).
EBA and ECB Respond to Proposals on Sustainability Disclosures
The European Banking Authority (EBA) and the European Central Bank (ECB) published their responses to the consultations of the International Sustainability Standards Board (ISSB) and the European Financial Reporting Advisory Group (EFRAG) on sustainability-related disclosure standards.
BIS Report Notes Existing Gaps in Climate Risk Data at Central Banks
A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.
EBA Publishes Multiple Regulatory Updates for Regulated Entities
The European Banking Authority (EBA) published the final guidelines on liquidity requirements exemption for investment firms, updated version of its 5.2 filing rules document for supervisory reporting, and Single Rulebook Question and Answer (Q&A) updates in July 2022.
EIOPA Issues SII Taxonomy and Guide on Sustainability Preferences
The European Insurance and Occupational Pensions Authority (EIOPA) published Version 2.8.0 of the Solvency II data point model (DPM) and XBRL taxonomy.
EESC Opines on Proposals on CRR and European Single Access Point
The European Union published, in the Official Journal of the European Union, an opinion from the European Economic and Social Committee (EESC); the opinion is on the proposal for a regulation to amend the Capital Requirements Regulation (CRR).
HM Treasury Publishes Multiple Regulatory Updates in July 2022
HM Treasury published a draft statutory instrument titled “The Financial Services (Miscellaneous Amendments) (EU Exit) Regulations 2022,” along with the related explanatory memorandum and impact assessment.
