CM-2.6 CM-2.6 Exempt Exposures
Exempt Exposures to Parties not Connected to the Licensee
CM-2.6.1
Certain types of
exposure are exempt from the 15 percentexposure limit set out in CM-2.5.3, but commitment to suchexposures must be reported to the CBB on a quarterly basis using the Form PIRI provided in Appendix BR-5.Added: June 2022CM-2.6.2
These exemptions fall into the following categories and are subject, in each case, to the policy statement:
(a) Short term interbank exposures, with original maturities of 3 months or less to parties not connected to the reportinglicensee ;(b)Exposures to GCC governments and their public sector entities that are not connected to the reportinglicensee and do not operate on a commercial basis, as set out in the guidelines to the PIRI (see Module CA).(c)Exposures secured by cash or GCC government securities or guarantees;(d)Exposures to central governments who are members of the Organisation for Economic Cooperation and Development (‘OECD’) orexposures secured by OECD central governmentsecurities /guarantees;(e) Pre-notified exposures which are covered by a guarantee from thelicensee’s parent (see Paragraphs CM-2.6.9 to CM-2.6.12); and(f) Sukuk or other Shari’a compliant securities issued or exposure to / exposure guaranteed by the Islamic Development Bank or any of its subsidiaries and other multilateral development banks, such as IMF, World Bank, Arab Monetary Fund, Asian Development Bank, African Development Bank, European Bank of Reconstruction and Development.Amended: October 2022
Added: June 2022CM-2.6.3
Where two or more entities that are outside the scope of sovereign exemption are controlled by or are economically dependent on an entity that falls within the scope of the sovereign exemption referred to in paragraph CM-2.6.2, and are closely related, those entities need not be deemed to constitute a group of closely related
counterparties pursuant to paragraph CM-2.5.4. Additionally, consistent with Module CA, where other supervisors also treat claims on named PSEs as claims on their sovereigns, claims to those PSEs are treated as claims on the respective sovereigns.Added: June 2022CM-2.6.4
If a
Bahraini Islamic bank licensee has an exposure to any entity noted in Paragraph CM-2.6.2 which is hedged by a Shari’a complianthedging instruments for credit protection, thelicensee will have to recognise an exposure to thecounterparty providing the credit protection, as prescribed in Paragraphs CM-2.4.2 and CM-2.3.16, notwithstanding the fact that the original exposure is exempted.Added: June 2022Exempt Exposures to Connected Counterparties
CM-2.6.5
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,
licensees must observe the CBB's solo capital adequacy requirements in Module CA.Added: June 2022CM-2.6.6
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 (See Paragraph CM-2.5.14).
Added: June 2022CM-2.6.7
Bahraini Islamic bank licensees 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.Added: June 2022CM-2.6.8
In the above scenario (Paragraph CM-2.6.7), for example, exposures of more than 15% of Total Consolidated Capital to a parent bank from a subsidiary bank may be permitted where they constitute short term financing of excess liquid funds.
Added: June 2022Exposures Undertaken by a Subsidiary Bank
CM-2.6.9
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.
Added: June 2022CM-2.6.10
Under the terms of this Module (see Sub-Paragraph CM-2.6.2(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 oflicensees 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.Added: June 2022CM-2.6.11
In the case of a Bahrain incorporated bank’s subsidiary in 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.Added: June 2022CM-2.6.12
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.
Added: June 2022
