CM-2.5.8
In establishing closely related
(a) Where 50 percent or more of one counterparty ’s gross receipts or gross expenditures (on an annual basis) are derived from transactions with the other counterparty (e.g. the owner of a residential/commercial property and the tenant who pays a significant part of the rent);
(b) Where one counterparty has fully or partly guaranteed the exposure of the other counterparty , or is liable by other means, and the exposure is so significant that the guarantor is likely to default if a claim occurs;
(c) Where a significant part of one counterparty ’s production/output is sold to another counterparty , which cannot easily be replaced by other customers ;
(d) When the expected source of funds to repay each loan one counterparty makes to another is the same and the counterparty does not have another source of income from which the loan may be fully repaid;
(e) Where it is likely that the financial problems of one counterparty would cause difficulties for the other counterparties in terms of full and timely repayment of liabilities;
(f) Where the insolvency or default of one counterparty is likely to be associated with the insolvency or default of the other(s); and
(g) When two or more counterparties rely on the same source for the majority of their funding and, in the event of the common provider’s default , an alternative provider cannot be found. In this case, the funding problems of one counterparty are likely to spread to another due to a one-way or two-way dependence on the same main funding source.
Added: June 2022