RBI Revises Large Exposures Framework for Banks
RBI has introduced certain amendments to the large exposures framework, which went into effect on April 01, 2019. Annex to the circular contains the revised guidelines, which supersede any earlier circulars that have been issued. The guidelines in the framework have come into effect from April 01, 2019 (as specified in a circular dated December 01, 2016), except guidelines in respect of paragraph 2(ii) (contained in paragraphs 6.2(b), 6.7, 6.8, 6.9, and 6.10 of the Annex) and non-centrally cleared derivatives exposures, which will become applicable with effect from April 01, 2020.
The recent amendments capture exposures and concentration risk more accurately and align the instructions with international norms. The amendments include the following:
- Exclusion of entities connected with the sovereign from definition of group of connected counterparties
- Introduction of economic interdependence criteria in definition of connected counterparties
- Mandatory application of look-through approach in determination of relevant counterparties, in case of collective investment undertakings, securitization vehicles, and other structures
Banks must apply the large exposures framework at the same level as the risk-based capital requirements are applied—that is, a bank shall comply with the norms at both the consolidated (Group) and solo levels. The application of the framework at the consolidated level implies that a bank must consider exposures of all the banking group entities (including overseas operations through branches and subsidiaries), which are under regulatory scope of consolidation, to counterparties and compare the aggregate of those exposures with the banking group’s eligible consolidated capital base. Appendix 1 for the large exposures framework contains the reporting template for large exposures. The reporting template covers the following:
- All exposures, measured as specified in paragraphs 7, 8, 9 and 10 of this framework, with values equal to or above 10% of the bank’s eligible capital (that is, meeting the definition of a large exposure as per para 4.1 above)
- All other exposures, measured as specified in paragraphs 7, 8, 9 and 10 of this framework without the effect of credit risk mitigation, with values equal to or above 10% of the bank’s eligible capital base
- All the exempted exposures (except intraday inter-bank exposures) with values equal to or above 10% of the bank’s eligible capital base
- Twenty largest exposures included in the scope of application, irrespective of the values of these exposures, relative to the bank’s eligible capital base
Effective Date: April 01, 2019/April 01, 2020
Keywords: Asia Pacific, India, Banking, Large Exposures, Concentration Risk, Basel III, Credit 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
Next Article
ECB Announces Start Date for Euro Short-Term RateRelated Articles
EBA Updates Filing Rules for Supervisory Reporting
The European Banking Authority (EBA) published version 5.1 of the filing rules for supervisory reporting.
ECB Amends Guideline on Procedures for Collection of AnaCredit Data
The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.
ECB Amends Guideline on Procedures for Collection of AnaCredit Data
The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.
EBA Publishes Standards on Disclosure of Investment Policy Under IFR
The European Banking Authority (EBA) published the final draft regulatory technical standards on disclosure of investment policy by investment firms, under the Investment Firms Regulation (IFR).
APRA Finalizes Guidance for New Prudential Standard on Remuneration
The Australian Prudential Regulation Authority (APRA) published the prudential practice guide CPG 511 to assist banks, insurers, and superannuation licensees in meeting requirements of CPS 511, the new prudential standard on remuneration.
OCC Updated LIBOR Self-Assessment Tool for Banks
The Office of the Comptroller of the Currency (OCC) published a bulletin that provides an updated self-assessment tool for banks to evaluate their preparedness for cessation of the London Interbank Offered Rate (LIBOR).
TCFD Updates Guidance for Financial Disclosures on Climate Risk
The Financial Stability Board (FSB) published a report that examines the progress made toward disclosures aligned with recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
BCBS Report Examines Progress on Adoption of Basel III Framework
The Basel Committee on Banking Supervision (BCBS) published the progress report on adoption of the Basel III regulatory framework in member jurisdictions.
ACPR Implements Updates Related to DPM Version 3.1
The French Prudential Supervisory Authority (ACPR) has implemented, in its information system, updates linked to the Data Point Model (DPM) version 3.1.
EBA Note Examines Transition Risks of Benchmark Rates
The European Banking Authority (EBA) published a thematic note that aims to identify and raise awareness of the transition risks of benchmark rates, as the London Interbank Offered Rate (LIBOR) and the Euro Overnight Index Average (EONIA) are close to being phased out.
