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  • Country and Transfer Risks

    • CM-1.2.29

      Conventional bank licensees must set out their policy on country and transfer risks within their Board approved credit risk policy. Such policy must include:

      (a) the risk appetite/tolerance levels for country and transfer risks;
      (b) country exposure limits;
      (c) basis and frequency for periodic reviews and assessments;
      (d) the criteria for downgrading a country exposure from Stage 1 to Stages 2 or 3, and related provisioning policy; and
      (e) the policy for recategorization of exposure to a higher grade.
      Amended: October 2022
      Added: June 2022

    • CM-1.2.30

      Country risk is the exposure to a loss in cross-border lending, caused by events in the country to which the licensee has exposure and includes all forms of lending whether to the government, a bank, a private enterprise or an individual. Country risk is therefore a broader concept than sovereign risk, which is restricted to the risk of lending to the government of a sovereign nation. Transfer risk, on the other hand, represents the risk of loss due to repatriation or remittance restrictions imposed by a foreign government that make it impossible to remit, fully or partially, the proceeds of debt owed to the licensee.

      Added: June 2022

    • CM-1.2.31

      In the case of exposure to borrowers, conventional bank licensees must examine any associated country and transfer risks keeping in view factors such as domicile of the counterparty, the legal structure of the counterparty, the existence of special purpose vehicles, conduits and/ or other related factors that may affect the transferability of proceeds of repayment.

      Added: June 2022

    • CM-1.2.32

      Branches of foreign bank licensees must satisfy the CBB that equivalent arrangements are in place at the parent entity level, otherwise a policy is required in line with Paragraph CM-1.2.28.

      Added: June 2022

    • CM-1.2.33

      Branches of foreign bank licensees are normally subject to country limits that are set at a global level by the head office or by the regional office. The branch should be able to demonstrate that it is subject to limits imposed on it by the head office or regional office as appropriate.

      Added: June 2022