Featured Product

    RBI Revises Large Exposures Framework for Banks

    June 03, 2019

    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
    Related Articles
    News

    EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0

    EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.

    April 08, 2021 WebPage Regulatory News
    News

    MAS Amends Notice on Related Party Transactions of Banks

    MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.

    April 08, 2021 WebPage Regulatory News
    News

    ECB Amends Guideline on Euro Short-Term Rate

    ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.

    April 07, 2021 WebPage Regulatory News
    News

    EBA Consults on Standards Related to FRTB-SA

    EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).

    April 07, 2021 WebPage Regulatory News
    News

    PRA Proposes Rules Related to IRB Approach for Credit Risk

    PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.

    April 07, 2021 WebPage Regulatory News
    News

    BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK

    The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks

    FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.

    April 06, 2021 WebPage Regulatory News
    News

    OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks

    OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.

    April 06, 2021 WebPage Regulatory News
    News

    EU Amends CRR and Securitization Regulation in Response to Pandemic

    To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).

    April 06, 2021 WebPage Regulatory News
    News

    HM Treasury Announces G7 Agreement on Green Agenda Ahead of COP26

    HM Treasury announced that G7 Finance Ministers and Central Bank Governors met ahead of COP 26, the 2021 UN Climate Change Conference, and agreed on green agenda.

    April 06, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6821