• PRU A4.11.1 PRU A4.11.1

    An Authorised Person may treat the following Exposures as exempt from the Concentration Risk limits in Chapter 4 if they are to Counterparties not Connected to the Authorised Person:

    (a) asset items or Exposures constituting claims on central governments and Central Banks which receive a Credit Quality Grade rating 1 or 2 in accordance with Rule 4.12.4;
    (b) asset items or Exposures constituting claims on international organisations and multi-lateral development banks (MDBs) which receive a 0% (Credit Quality Grade rating of 1) risk weight as set out at Rule 4.12.7;
    (c) asset items or Exposures carrying the explicit guarantees of either (a) or (b) where the claims on the entity providing the guarantee would receive a 0% weighting (Credit Quality Grade rating of 1);
    (d) Exposures for which the Authorised Person has Collateral in the form of cash Deposits or certificates of Deposit, including certificates of Deposit issued by the Authorised Person, held by the Authorised Person, or held by the Authorised Person's Parent Financial Institution or a Subsidiary of the Authorised Person, but only if:
    (i) the Authorised Person and its Parent Financial Institution or the Subsidiary of the Authorised Person concerned are subject to consolidated supervision; and
    (ii) the enforceability requirements in Section 4.13 (CRM) are met;
    (e) Exposures arising from undrawn credit facilities that are classified as low risk off balance sheet items and provided that an agreement has been concluded with the Client or group of Connected clients under which the facility can only be drawn only if it has been ascertained that it will not cause the limit as set out in Rule 4.15.5 to be exceeded;
    (f) Exposures secured by mortgages on residential property and leasing transactions under which the lessor retains full ownership of the residential property leased for as long as the lessee has not exercised his option to purchase, in all cases up to 50% of the value of the residential property concerned; and
    (g) material holdings in Financial Institutions and other Exposures which have been deducted from an Authorised Person's Capital Resources as required in Chapter 3.

    • Guidance

      1. In order to be applicable under (c) the guarantees must meet the requirements of Section 4.13.9 in relation to CRM.
      2. An Authorised Person can only treat Exposures as collateralised provided the conditions of Rules 4.13.5 to 4.13.8 (relating to CRM) are met. Item (d) also includes cash received under a CLN issued by the Authorised Person and loans and Deposits of a Counterparty to or with the Authorised Person which are subject to an on balance sheet Netting agreement recognised under Section 4.13 (CRM).
      3. The Regulator may consider a waiver for other sovereign Exposures where there is a local regulatory requirement to hold assets with a national regulatory authority. Authorised Persons will be required to apply for a waiver of the Large Exposure requirements in this regard and will be considered by the Regulator on a case by case basis.