Featured Product

    RBI Amends Large Exposures Framework for Banks

    September 12, 2019

    RBI made certain amendments to the large exposures framework for all scheduled commercial banks in India. RBI decided that a bank’s exposure to a single non-banking financial institution, or NBFC (excluding gold loan companies), will be restricted to 20% of that bank’s eligible capital base, instead of the earlier restriction of 15%. The large exposures framework has been effective since April 01, 2019. However, non-centrally cleared derivatives exposures will be outside the purview of exposure limits till April 01, 2020.

    Under the revised guidelines on large exposure framework that came into effect from April 01, 2019, a bank’s exposure to a single NBFC is restricted to 15% of its tier I capital. However, for entities in the other sectors, the exposure limit is 20% of tier I capital of the bank, which can be extended to 25% by banks’ Boards under exceptional circumstances. As a step toward harmonization of the counterparty exposure limit to single NBFC with that of the general limit, RBI has decided to raise a bank’s exposure limit to a single NBFC to 20% of tier I capital of the bank. Under the large exposures framework, an exposure to a counterparty will constitute both on- and off-balance sheet exposures included in either the banking or trading book and instruments with counterparty credit risk.

    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.  

     

    Keywords: Asia Pacific, India, Banking, NBFC, Large Exposures, Basel III, Credit Risk, Regulatory Capital, RBI

    Featured Experts
    Related Articles
    News

    EBA Updates List of Validation Rules for Reporting by Banks

    EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.

    September 10, 2020 WebPage Regulatory News
    News

    EBA Responds to EC Call for Advice to Strengthen AML/CFT Framework

    EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).

    September 10, 2020 WebPage Regulatory News
    News

    NGFS Advocates Environmental Risk Analysis for Financial Sector

    NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.

    September 10, 2020 WebPage Regulatory News
    News

    MAS Issues Guidelines to Promote Senior Management Accountability

    MAS published the guidelines on individual accountability and conduct at financial institutions.

    September 10, 2020 WebPage Regulatory News
    News

    APRA Formalizes Capital Treatment and Reporting of COVID-19 Loans

    APRA published final versions of the prudential standard APS 220 on credit quality and the reporting standard ARS 923.2 on repayment deferrals.

    September 09, 2020 WebPage Regulatory News
    News

    SRB Chair Discusses Path to Harmonized Liquidation Regime for Banks

    SRB published two articles, with one article discussing the framework in place to safeguard financial stability amid crisis and the other article outlining the path to a harmonized and predictable liquidation regime.

    September 09, 2020 WebPage Regulatory News
    News

    FSB Workshop Discusses Preliminary Findings of Too-Big-To-Fail Reforms

    FSB hosted a virtual workshop as part of the consultation process for its evaluation of the too-big-to-fail reforms.

    September 09, 2020 WebPage Regulatory News
    News

    ECB Updates List of Supervised Entities in EU in September 2020

    ECB updated the list of supervised entities in EU, with the number of significant supervised entities being 115.

    September 08, 2020 WebPage Regulatory News
    News

    OSFI Identifies Focus Areas to Strengthen Third-Party Risk Management

    OSFI published the key findings of a study on third-party risk management.

    September 08, 2020 WebPage Regulatory News
    News

    FSB Extends Implementation Timeline for Framework on SFTs

    FSB is extending the implementation timeline, by one year, for the minimum haircut standards for non-centrally cleared securities financing transactions or SFTs.

    September 07, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5796