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  • CM-5.6 CM-5.6 Exempt or Temporary Exposures

    • Exempt Exposures to Parties not Connected to the Bank

      • CM-5.6.1

        Certain types of exposure are exempt from the 15% exposure limit set out in CM-5.5.4, but prior notification of commitment to such exposures must be made to the CBB and then retrospectively on a quarterly basis using the Form PIR provided in Appendix BR-5.

        Amended: April 2011
        Amended: January 2011
        October 2007

      • 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 CBB:

        (a) Short term (i.e. up to three months original maturity) interbank exposures to parties not connected to the reporting bank;
        (b) Exposures to GCC governments, and their public sector entities that do not operate on a commercial basis, as set out in the guidelines to the PIR (see Module CA) where such bodies are not connected to the reporting bank;
        (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) Specific connected short-term exposures agreed with and approved in advance by the CBB, in particular those arising from a group Treasury function (see Paragraph CM-5.6.5);
        (f) Pre-notified 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) Sukuk or other securities issued or guaranteed by the Islamic Development Bank or any of its subsidiaries.
        Amended: January 2015
        Amended: January 2011
        October 2007

    • Temporary Exposure Limits to Commercial Entities not Connected to the Bank

      • CM-5.6.2A

        In certain circumstances outlined below, banks may apply on a case-by-case basis to the CBB for approval of certain underwriting or investment business related exposures above the 15% single exposure limit (in CM-5.5.4) for periods of up to 3 months where the entity is a commercial entity.

        Amended: January 2015
        Amended: January 2012
        Added: January 2011

      • CM-5.6.2B

        A bank may not incur an exposure which arises when a bank enters into a legally binding commitment to underwrite a securities issue or to provide a syndicated loan for another commercial entity not connected to the bank, which exceeds 15% of the bank's consolidated Total Capital without the prior written approval of the CBB. The maximum level of such exposures per counterparty that the CBB may approve must not exceed 30% of the concerned bank's consolidated Total Capital during the three-month period.

        Amended: April 2015
        Amended: January 2015
        Amended: January 2012
        Added: January 2011

      • CM-5.6.2C

        Such securities underwriting exposures must be included in the trading book policy statement of a bank wishing to use this higher temporary limit. Any residual holdings of securities or syndicated loan commitments held for more than three months from the commitment date of underwriting must be risk-weighted at 800% where there are any excesses above the materiality thresholds outlined in Paragraph CA-2.4.25. Where the lead bank has obtained legally binding irrevocable (i.e. full) commitments from other institutions to participate in the concerned securities issue or to participate in providing the syndicated loan facilities, the lead underwriter or syndicate manager may show participations to the concerned sub-underwriting/ participating institution rather than to the issuer of the security or the loan obligor. The CBB will not allow any bank to include syndicated credit facilities to, or holdings of securities issued by any of the concerned bank or its connected counterparties (including SPVs connected through ownership, control or establishment) to be included in this temporary 30% limit.

        Amended: January 2015
        Amended: January 2012
        Added: January 2011

      • CM-5.6.2D

        A bank may not incur any temporary large exposures arising from investment business (where the intention by the concerned bank is to securitize such assets or place them with investors), which exceeds 15% of the bank's consolidated total capital without the prior written approval of the CBB. The maximum level of such temporary exposures that the CBB may approve per individual exposure must not exceed 25% of the concerned bank's consolidated total capital for a maximum six-month period. Any such exposures held for more than six months from the originating date of the exposure must be risk-weighted at 800% where there is any excess above the materiality thresholds mentioned in Paragraph CA-2.4.25. In order for a bank to be allowed such exposures, it must have in place a written detailed due diligence policy for such business which must be approved by the bank's board of directors and related procedures which must be approved by senior management.

        Amended: January 2020
        Amended: January 2015
        Amended: January 2012
        Added: January 2011

      • CM-5.6.2E

        In order to qualify for these temporary limits, banks must submit a request for each individual exposure to the CBB and the CBB shall respond within two weeks from the date of receiving a complete set of all required documents. The CBB will take into account any existing exposures to the concerned counterparties in its consideration of any application for such temporary large exposures limits.

        Amended: April 2012
        Amended: January 2012
        Added: January 2011

      • CM-5.6.2F

        In the case of any subsequent proposed increment in the amount of exposure (for example where a limit of 20% has been approved), the CBB's prior approval must be obtained (as outlined above). CBB approval for fair value changes to holdings/ underwritings of securities during the temporary approval period will not be required.

        Amended: April 2012
        Amended: January 2012
        Added: January 2011

      • CM-5.6.2G

        Temporary large exposures arising from investment business (where the intention by the concerned bank is to securitize such assets or place them with investors) referred to in Paragraph CM-5.6.2D are not subject to the 'connected counterparty' and significant investments in commercial entities limits and treatments during the six-month period. After the expiry of this period, the limits and deduction treatments relating to significant investments in commercial entities and 'connected counterparties' apply.

        Amended: January 2015
        Added: January 2012

    • 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 from the limits in this Module on a consolidated basis, however banks must observe the CBB's solo capital adequacy requirements in Module CA.

        Amended: January 2015
        Amended: January 2011
        October 2007

      • CM-5.6.4

        Exposures to unconsolidated subsidiaries (normally non-financial and outside the scope of regulatory consolidation) are not exempt from the limits in this Module and are included under the limits for exposures to associates, related parties and unconsolidated subsidiaries.

        Amended: January 2015
        Amended: January 2011
        October 2007

      • CM-5.6.5

        Banks may apply to the CBB 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 CBB's policy regarding the taking on of a treasury role includes exposures arising from a central risk management function. Such exposures must be approved by the CBB before they may be exempted.

        Amended: January 2015
        Amended: January 2011
        October 2007

      • CM-5.6.6

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

        Amended: January 2015
        October 07

    • 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 bank, the Bahrain subsidiary bank may be deemed to have an exposure to its parent bank.

        Amended: January 2011
        October 2007

      • CM-5.6.8

        Under the terms of this Module (see Paragraph CM-5.6.2(f)), such indirect exposures to a parent bank may be exempted from the limits on large exposures if the CBB is satisfied that:

        (a) Such exposures have been pre-notified to the CBB for the CBB's approval and are entered into within the terms of a policy agreed by the parent bank;
        (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; and
        (c) In the case of banks, which are the Bahrain subsidiaries of overseas banks, the supervisory authority of the parent bank has approved the exposures that can be undertaken by the Bahrain subsidiary.
        Amended: January 2015
        Amended: January 2011
        October 2007

      • CM-5.6.9

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

        Amended: January 2015
        Amended: January 2011
        October 2007

      • CM-5.6.10

        The CBB 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.

        Amended: January 2011
        October 2007