CM-4.5 CM-4.5 Exempt exposures
CM-4.5.1
Certain types of exposure are exempt from the limits set out above, but notification of such exposures should be made to the Agency.
CM-4.5.2
These exemptions fall into the following categories and are subject, in each case, to the policy statement as agreed with the Agency:
(a) Islamic bonds/ Sukook issued or guaranteed by the Government of Bahrain or its Agencies;(b) Islamic bonds/ Sukook issued or guaranteed by the IDB;(c) Short term (one year or less) interbank exposures;(d) Exposures to GCC governments, their semi-government institutions and agencies that do not operate on commercial basis;(e) Exposures to OECD central governments;(f) Exposures secured on cash or GCC government securities/guarantees;(g) Exposures secured on OECD central government securities/guarantees;(h) Certain connected exposures, in particular those arising from a group treasury function;(i) Exposures which are covered by a guarantee from the bank's parent (see paragraph CM-4.5.8);(j) Exposures arising from underwriting activities, such exposures continuing for no more than 90 calendar days. Any residual holdings of securities for more than 90 days from the commitment date of underwriting would be subject to normal large exposure limits;(k) Exposures where the bank is acting as agent for an investor in a single purpose, non-discretionary capacity, and the bank has the full right to set-off losses and costs against any funds provided by the investor (examples might include real estate investments); and(l) Syndicated facilities being financed by restricted investment accounts where the investor is fully aware of the type of investment and the associated risks.Exempt exposures to connected counterparties
CM-4.5.3
In respect of exposures to other group companies, the Agency's policy allows 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-4.5.4
In certain exceptional cases, exposures of more than 15% of (consolidated) capital base to a bank which controls the financing bank may be permitted for utilisation of surplus liquid funds for a short period not exceeding 90 days even where the financing bank does not perform a treasury role. Any other form of connected financing outside the scope of the above will be dealt with by the Agency on a case-by-case basis.
Exposures undertaken by a subsidiary bank or by a branch outside Bahrain
CM-4.5.5
In the case of banks, which are the Bahrain subsidiaries of overseas banks, the Agency will agree in writing with the supervisory authority of the parent bank, the size of exposures that can be undertaken by the subsidiary.
CM-4.5.6
Exposures undertaken by a branch of a foreign bank on the books in Bahrain should be within the policy statement of the parent bank (company) as agreed by the parent's regulatory authority.
CM-4.5.7
Overseas subsidiaries of Bahrain banks will be expected to comply with the regulatory requirements of the country in which they are located.
CM-4.5.8
Where exposures undertaken by a subsidiary bank are guaranteed by its parent, the subsidiary bank may be deemed to have an exposure to the parent.
CM-4.5.9
Under the terms of this Module, 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 non-performing or require to be written off.CM-4.5.10
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 for the subsidiary, the Bahrain parent must at all times have room to take over the exposure, without itself exceeding the limit of 15% of capital base. Also, the combined (on and off balance sheet) exposure of the banking group to the customer must be within 35% of the parent bank's consolidated capital base.
CM-4.5.11
The Agency will need to be satisfied that adequate control systems are in place to ensure that credit risk taken in the group as a whole is properly monitored and controlled.
