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  • Limit on exposures to connected counterparties

    • CM-4.4.8

      Exposures to connected counterparties may be justified only when undertaken for the clear commercial advantage of the bank, when negotiated and agreed on an arm's length basis, and when included in the policy statement agreed with the Agency.

    • CM-4.4.9

      No Islamic facilities provided by a bank to its own external auditors shall be permitted. In addition, unless provided for in the contract, off balance sheet restricted investment accounts will not be permitted to participate in on balance sheet corporate funding and vice versa and movement within restricted investment accounts is not permitted without the Agency's prior written approval.

    • CM-4.4.10

      For the purpose of this module, "Connected counterparties" includes companies or persons connected with the bank, including, in particular, subsidiaries and associated companies (whether such association is due to control or shareholding or otherwise), Directors and their associates (whether such association is due to control or family links or otherwise), members of the Shari'a Supervisory Board, management and other staff, and shareholders holding 10% or more of the voting power of the bank. In this context, family links means spouse, father, mother, sons, daughters, sisters and brothers.

    • CM-4.4.11

      The Agency will closely examine all exposures to companies or persons connected to a bank and will deduct them from the bank's (consolidated) capital base if they are, in the Agency's opinion, of the nature of a capital investment, or provision of long-term working capital, or are made on particularly concessionary terms.

    • CM-4.4.12

      The limits for exposure to connected counterparties have been set as follows:

      (a) Direct exposures: A bank may not incur an exposure (whether funded or not funded) to an individual connected counterparty (as defined above) which exceeds 15% of the reporting bank's (consolidated) capital base. The aggregate exposures to all counterparties within this category should not exceed 25% of the bank's consolidated capital base.
      (b) Restricted investment accounts: A bank may not incur an exposure (whether funded or not funded) to an individual connected counterparty where the exposure is funded by restricted investment accounts which exceeds 25% of the reporting bank's (consolidated) capital base. The aggregate exposures to all counterparties within this category should not exceed 35% of the bank's consolidated capital base.
      (c) The combined exposures: A combined exposure of (a) & (b) above (funded by unrestricted investment accounts and bank's own funds, and restricted investment accounts) whether funded or not funded, to an individual connected counterparty may not exceed 25% of the reporting bank's (consolidated) capital base.
      (d) The aggregate exposures to connected counterparties: (whether funded from on balance sheet or restricted investment accounts) may not exceed 60% of the bank's (consolidated) capital base, whether funded or not funded.