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  • 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