BoM published the guideline on the regulatory credit concentration limits and the basic framework of credit concentration risk management to be put in place by financial institutions. BoM has amended Annex I of the guideline to require the exposure value of on-balance sheet items to be defined as the accounting value of the exposure, net of specific provisions and value adjustments. Alternatively, a financial institution may consider the exposure value gross of specific provisions and value adjustments. Details on the computation of Fund Based and Non-Fund Based exposures have been removed. The changes in the guideline shall be applicable with immediate effect.
The guideline applies to all banks and non-bank deposit-taking institutions licensed under the Banking Act 2004. The guideline stipulates that a financial institution shall report to BoM on a quarterly basis, in the required form and manner, all information related to its large credit exposures, including exemptions permitted under this guideline. A financial institution shall develop credit policy, which shall comprise the credit concentration risk policy. This should include the principles and objectives governing the extent to which they are willing to accept credit concentration risk. The policy shall set out prudent rules and internal limits for granting credit to a single customer and its related parties, which shall not exceed the stipulated regulatory limits. A financial institution shall at least once a year conduct stress tests of its major credit risk concentrations and review the results of those tests to identify and respond to potential changes in market conditions that could inversely impact the performance of the financial institution. The results of the stress test shall be made available to BoM for examination.
BoM will assess the adequacy of processes, procedures, and policies put in place by a financial institution to ensure that it does not face excessive concentration risk by way of over exposure to a customer, sector, interlinked industries, and financial institutions, among others. When the risks arising from credit risk concentrations are not adequately addressed, BoM may take appropriate action, including prohibiting the institution from taking additional exposure and imposing a higher capital charge. Any financial institution, which is in non-compliance with the requirements of this guideline, shall within three months of the coming into effect of this guideline submit a plan showing the manner in which it will achieve compliance. This guideline has been intended to align the current BoM framework with the BCBS norms in the standard on “Supervisory Framework for measuring and controlling large exposures,” which was published in April 2014.
Effective Date: August 22, 2019
Keywords: Middle East and Africa, Mauritius, Banking, Concentration Risk, Credit Risk, Large Exposures, Guideline, BoM
Previous ArticleFASB Publishes Summary of CECL Related Discussions at Its Meeting
The Prudential Regulation Authority (PRA) published the final policy statement PS21/21 on the leverage ratio framework in the UK. PS21/21, which sets out the final policy of both the Financial Policy Committee (FPC) and PRA
The Consumer Financial Protection Bureau (CFPB) proposed to amend Regulation B to implement changes to the Equal Credit Opportunity Act (ECOA) under Section 1071 of the Dodd-Frank Act.
The Prudential Regulation Authority (PRA) decided to maintain, at the 2019 levels, the buffer rates for the Other Systemically Important Institutions (O-SII) for another year, with no new rates to be set until December 2023.
The Financial Stability Board (FSB) published a progress report on implementation of its high-level recommendations for the regulation, supervision, and oversight of global stablecoin arrangements.
In a letter to the authorized deposit taking institutions, the Australian Prudential Regulation Authority (APRA) announced an increase in the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) are consulting on the preliminary guidance that clarifies that stablecoin arrangements should observe international standards for payment, clearing, and settlement systems.
The European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have set out their respective work priorities for 2022.
The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0, in addition to the reporting module on leverage under the common reporting (COREP) framework.
The European Commission (EC) published the Implementing Decision 2021/1753 on the equivalence of supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures, in accordance with the Capital Requirements Regulation or CRR (575/2013).
EC published the Implementing Regulation 2021/1751, which lays down implementing technical standards on uniform formats and templates for notification of determination of the impracticability of including contractual recognition of write-down and conversion powers.