1. The total outstanding exposure (fund based and non-fund based) by a bank/DFI to any single person shall not at any point in time exceed 30% of the bank’s/DFI’s equity as disclosed in the latest audited financial statements, subject to the condition that the maximum outstanding against fund based exposure does not exceed 20% of the bank’s/DFI’s equity.
Equity of the Bank/DFI means
Tier-I Capital or Core Capital and includes
In case of branches of foreign banks operating in Pakistan, equity will mean capital maintained, free of losses and provisions, under Section 13 of the Banking Companies Ordinance, 1962.
For the purpose of Regulation R-1, reserve shall also include revaluation reserves on account of fixed assets to the extent of 50% of their value. However, for this purpose assets must be prudently valued by valuators on the panel of Pakistan Bank Association (PBA), fully taking into account the possibility of price fluctuations and forced sale value. Revaluation reserves reflecting the difference between the book value and the market value will be eligible up to 50%.
Exposure
means financing facilities whether fund based and/or non-fund based and include:
i) Any form of financing facility extended or bills purchased/discounted except ones drawn against the L/Cs of banks/DFIs rated at least ‘A’ by Standard & Poor, Moody’s, Fitch-Ibca, Japan Credit Rating Agency (JCRA) or credit rating agency on the approved panel of State Bank of Pakistan and duly accepted by such L/C issuing banks/DFIs:
ii) Any financing facility extended or bills purchased/discounted on the guarantee of the person.
iii) Subscription to or investment in shares, Participation Term Certificates, Term Finance Certificates or any other Commercial Paper by whatever name called (at book value) issued or guaranteed by the persons.
iv) Credit facilities extended through corporate cards.
v) Any financing obligation undertaken on behalf of the person under a letter of credit including a stand-by letter of credit, or similar instrument.
vi) Loan repayment financial guarantees issued on behalf of the person.
vii) Any obligations undertaken on behalf of the person under any other guarantees including underwriting commitments.
viii) Acceptance/endorsements made on account.
ix) Any other liability assumed on behalf of the client to advance funds pursuant to a contractual commitment.
2. The total outstanding exposure (fund based and non-fund based) by a bank/DFI to any group shall not exceed 50% of the bank’s/DFI’s equity as disclosed in the latest audited financial statements, subject to the condition that the maximum outstanding against fund based exposure does not exceed 35% of the bank’s/DFI’s equity.
3. Limit on exposure to a single person/Group effective from 31-12-2009 and onward would be as under:
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| Exposure limit as a % of bank’s/DFI’s equity |
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| (as disclosed in the latest audited financial statements) |
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| For single person | For group |
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| Effective date | Total |
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| outstanding | Fund based | Total outstanding | Fund based |
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| (fund and non- | outstanding | (fund and non-fund | outstanding |
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| fund based) | limit | based) exposure limit | limit |
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| exposure limit |
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| 31-12-2009 | 30 | 20 | 45 | 35 |
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| 31-12-2010 | 30 | 20 | 40 | 35 |
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| 31-12-2011 | 30 | 20 | 35 | 30 |
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| 31-12-2012 | 30 | 20 | 30 | 25 |
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| 31-12-2013 | 25 | 25 | 25 | 25 |
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4. The group will cover both corporate entities as well as SMEs, in cases where such entities are owned by the same group.
5. For the purpose of this regulation banks/DFIs are required to follow the guidelines given at Annexure-I.
ANNEXURE-I
GUIDELINES REGARDING LIMIT ON EXPOURE
TO A SINGLE PERSON UNDER REGULATION R-1
1. In arriving at exposure under Regulation R-1:
A) 100% of the deposits placed with lending bank/DFI, under perfected lien and in the same currency, as that of the loan, shall be excluded.
B) 90% of the following shall be deducted;
i) deposits placed with the lending bank/DFI, under perfected lien, in a currency other than that of the loan;
ii) deposits with another bank/DFI under perfected lien;
iii) encashment value of Federal Investment Bonds, Pakistan Investment Bonds, Treasury Bills and National Saving Scheme securities, lodged by the borrower as collateral; and
iv) Pak. Rupee equivalent of face value of Special US Dollar Bonds converted at inter-bank rate, lodged by the borrower as collateral.
C) 85% of the unconditional financial guarantees accepted as collateral and payable on demand by banks/DFIs, rated at least ‘A’ or equivalent by a credit rating agency on the approved panel of State Bank of Pakistan, Standard & Poors, Moody, Fitch Ibca or Japan Credit Rating Agency (JCRA) shall be deducted. Similar weightage to guarantees issued by the International Finance Corporation (IFC), Commonwealth Development Corporation (CDC) Deutsche Investions and ntwicklungsgesellschaft nbH (DEG), Netherland Financierings Maatschappijvoor Ontwikklelingslanden N.V (FMO) and Asian Development Bank (ADB) shall also apply.
D) 50% of listed Term Finance Certificates held as security with duly marked lien shall be deducted. The TFCs to qualify for this purpose should have been rated at least ‘A’ or equivalent by a credit rating agency on the approved panel of State Bank of Pakistan.
E) Weightage of 50% shall be given to;
i) documentary credits (except Standby Letter of Credits where 100% exposure would be counted) opened by banks/DFIs;
ii) guarantees/bonds other than financial guarantees;
iii) underwriting commitments.
F) The following different weightages will be applicable to exposure taken against commercial banks/DFIs in respect of placements;
i) 10% weightage on exposure to banks/DFIs with ‘AAA’ rating.
ii) 25% weightage on exposure to banks/DFIs rated ‘A' and above.
iii) 50% weightage on exposure to banks /DFIs rated ‘BBB’ and above.
The banks/DFIs shall, however, ensure that the overall limit for each financial institution in respect of inter-bank placements is invariably approved by their Board of Directors.
2. For the purpose of this regulation, exposure shall not include the following:
i) Loans and advances (including bills purchased and discounted) given to the Federal Government or any of their agencies under the commodity operations program of the Federal Government, or guaranteed by the Federal Government.
ii) Obligations under letters of credit and letters of guarantee to the extent of cash margin held by the bank/DFI.
iii) Letters of credit, which do not create any obligation on the part of the bank/DFI (no liability L/C) to make payments on account of imports.
iv) Letters of credit opened on behalf of Federal Government where payment is guaranteed by State Bank of Pakistan/Federal Government.
v) Facilities provided to commercial banks/DFIs through REPO transactions with underlying SLR eligible securities.
vi) Pre-shipment/post-shipment credit provided to finance exports of goods covered by letter of credit/firm contracts including financing provided from the bank’s /DFI’s own resources.
vii) Letters of credit established for the import of plant and machinery.
