Guidance Notes - Large Exposure Return (December 2011)

Summary

These guidance notes from the Bermuda Monetary Authority explain how licensed banks and deposit companies must complete the Large Exposure Return, a periodic report identifying an institution's largest credit exposures to individual counterparties and groups of connected counterparties. They set out the reporting form's structure, the definitions of an exposure and the amount at risk, and how various instrument types and offsetting arrangements should be treated.

• Reporting form: Exposures must be reported in BD$000s, in descending order by size within each counterparty category, against the capital base notified by the Authority.
• Part 1 non-bank exposures: List the 20 largest exposures to individual non-bank counterparties and groups of closely related non-bank counterparties, plus any exposure exceeding 10% of capital base; highlight connected counterparties with an asterisk.
• Part 2 bank exposures: List the 20 largest exposures to banks and any exceeding 10% of capital base, separately identifying non-marketable elements with remaining maturity over one year.
• Part 3 sovereign exposures: List all exposures to Zone A and Zone B central governments and central banks exceeding 10% of capital base.
• Definitions and calculation rules: Exposures must be calculated using the document's definitions of an exposure, the amount at risk, a counterparty, and identity of a counterparty, including treatment of provisions, write-offs, foreign currency conversion, netting, securities positions, syndicated loans, and derivative credit equivalent amounts.
• Additional information: The Authority may require additional information beyond the standard return under section 38(4) of the Banks and Deposit Companies Act 1999, as agreed in writing with the institution.

The notes are interpretive guidance supporting a standing regulatory return rather than a standalone rule with its own filing date; no specific submission deadline or effective date is stated in this excerpt.

Key obligations

• Report exposures in the Large Exposure Return in BD$000s, listing exposures within each counterparty category in descending order by size
• List the 20 largest exposures to individual non-bank counterparties and groups of closely related non-bank counterparties, and any exposure exceeding 10% of the institution's capital base
• Report exposures to a group of closely related counterparties as a single exposure
• Highlight with an asterisk any non-bank exposures connected to the reporting institution
• List the 20 largest exposures to banks and any exceeding 10% of capital base, separately identifying non-marketable elements with remaining maturity over one year
• List all exposures to Zone A and Zone B central governments and central banks exceeding 10% of capital base
• Calculate exposures and the amount at risk in accordance with the definitions, valuation, netting, and derivative credit-equivalent rules set out in the guidance, consistent with the institution's capital base accounting practice
• Report write-offs made since the last reporting date on a separate sheet attached to the return
• Provide additional information requested by the Authority under section 38(4) of the Banks and Deposit Companies Act 1999 as agreed in writing

Applies to

banks, deposit companies, reporting institutions under the Banks and Deposit Companies Act 1999