Requirements
This chapter establishes limits on large exposures, relative to a bank's Tier 1 capital, and regulatory reporting requirements.
- Effective as of: 15 Dec 2019
- Last update: 15 Dec 2019
- Status Current
Minimum requirement – the large exposure limit
20.1
The sum of all the exposure values of a bank to a single counterparty or to a group of connected counterparties must not be higher than 25% of the bank’s Tier 1 capital at all times. However, as explained in LEX40, this figure is set at 15% for a global systemically important bank’s (G-SIB’s) exposures to another G‑SIB.
20.3
Breaches of the limit, which must remain the exception, must be communicated immediately to the supervisor and must be rapidly rectified.
Regulatory reporting
20.4
Banks must report to the supervisor the exposure values before and after application of the credit risk mitigation techniques. Banks must report to the supervisor:
- all exposures with values measured as specified in LEX30 equal to or above 10% of the bank's Tier 1 capital (ie meeting the definition of a large exposure in LEX10.8);
- all other exposures with values measured as specified in LEX30 without the effect of credit risk mitigation being taken into account equal to or above 10% of the bank's Tier 1 capital;
- all the exempted exposures with values equal to or above 10% of the bank's Tier 1 capital; and
- their largest 20 exposures to counterparties measured as specified in LEX30 and included in the scope of application, irrespective of the values of these exposures relative to the bank's Tier 1 capital.
This standard describes the scope of application of the Basel Framework.
This standard describes the criteria that bank capital instruments must meet to be eligible to satisfy the Basel capital requirements, as well as necessary regulatory adjustments and transitional arrangements.
This standard describes the framework for risk-based capital requirements.
This standard describes how to calculate capital requirements for credit risk.
This standard describes how to calculate capital requirements for market risk and credit valuation adjustment risk.
This standard describes how to calculate capital requirements for operational risk.
This standard describes the simple, transparent, non-risk-based leverage ratio. This measure intends to restrict the build-up of leverage in the banking sector and reinforce the risk-based requirements with a simple, non-risk-based "backstop" measure.
This standard describes the Liquidity Coverage Ratio, a measure which promotes the short-term resilience of a bank's liquidity risk profile.
The net stable funding ratio requires banks to maintain a stable funding profile in relation to the composition of their assets and off-balance-sheet activities.
Large exposures regulation limits the maximum loss that a bank could face in the event of a sudden counterparty failure to a level that does not endanger the bank's solvency. This standard requires banks to measure their exposures to a single counterparty or a group of connected counterparties and limit the size of large exposures in relation to their capital.
This standard establishes minimum standards for margin requirements for non-centrally cleared derivatives. Such requirements reduce systemic risk with respect to non-standardised derivatives by reducing contagion and spillover risks and promoting central clearing.
The Pillar 2 supervisory review process ensures that banks have adequate capital and liquidity to support all the risks in their business, especially with respect to risks not fully captured by the Pillar 1 process, and encourages good risk management.
This standard sets out disclosure requirements, which aim to encourage market discipline.
The Basel Core Principles provide a comprehensive standard for establishing a sound foundation for the regulation, supervision, governance and risk management of the banking sector.
