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  • CM-5.6 CM-5.6 Exempt exposures

    • CM-5.6.1

      Certain types of exposure are exempt from the limits set out above, but notification of such exposures should be made to the Agency on a quarterly basis in the format provided in Appendix BR-3.

    • CM-5.6.2

      These exemptions fall into the following categories and are subject, in each case, to the policy statement as agreed with the Agency:

      (a) short term (i.e. up to six months original maturity) interbank exposures;
      (b) exposures to GCC governments, their semi-governmental institutions and agencies that do not operate on a commercial basis, as set out in the guidelines to the PIR/PIRC (see Module CA);
      (c) exposures to OECD central governments or exposures secured by OECD central government securities / guarantees;
      (d) exposures secured by cash or GCC government securities / guarantees;
      (e) certain connected exposures, in particular those arising from a group Treasury function (see paragraphs CM-5.6.3 to CM-5.6.6);
      (f) exposures which are covered by a guarantee from the bank's parent (see paragraphs CM-5.6.7 to CM-5.6.10); and
      (g) exposures arising from underwriting activities, such exposures continuing for no more than 90 calendar days. Underwriting exposures should normally be part of the trading book of a bank. Any residual holdings of securities held for more than 90 days from the commitment date of underwriting are no longer exempt and are subject to normal large exposure limits.

    • Exempt exposures to connected counterparties

      • CM-5.6.3

        Exposures to subsidiaries which are always fully consolidated on a line-by-line basis for all supervisory purposes are exempt, however banks should bear in mind the capital adequacy requirements on a solo basis.

      • CM-5.6.4

        Exposures to unconsolidated subsidiaries are not exempt and will be included under the limits for exposures to associated companies.

      • CM-5.6.5

        In respect of exposures to other connected counterparties, the Agency will allow a bank to take on a Treasury role on behalf of the group as a whole (provided that the group is subject to consolidated supervision by its home supervisor). The Agency's policy regarding the taking on of a Treasury role includes exposures arising from a central risk management function.

      • CM-5.6.6

        In the above scenario (paragraph CM-5.6.5), for example, exposures of more than 15% of the capital base to a parent bank from a subsidiary bank may be permitted where they constitute short term lending of excess liquid funds.

    • Exposures undertaken by a subsidiary bank

      • CM-5.6.7

        Where exposures undertaken by a Bahrain subsidiary of an overseas bank are guaranteed by its parent, the Bahrain subsidiary bank may be deemed to have an exposure to its parent.

      • CM-5.6.8

        Under the terms of this module (see paragraph CM-5.6.2), such indirect exposures to a parent bank may be exempt from the limits on large exposures if the Agency is satisfied that:

        (a) such exposures are entered into within the terms of a policy agreed by the parent bank, and
        (b) there are guarantees in place from the parent bank to protect the subsidiary should the exposure become impaired or require to be written off.

      • CM-5.6.9

        In the case of a Bahrain incorporated bank's subsidiary inside Bahrain, in order for an exposure exceeding 15% of capital base to be acceptable in the subsidiary, the Bahrain parent must at all times have capacity to take on the capacity to the third party, without itself exceeding the limit of 15% of capital base. Also, the total exposure of the banking group to the customer must be within 15% of the parent bank's consolidated capital base.

      • CM-5.6.10

        The Agency will need to be satisfied that adequate control systems are in place to ensure that risks taken in the group as a whole are properly monitored and controlled.