4. Maximum Exposure Limits
4.1. Exposure Limits
All banks are required to ensure compliance of the following exposure limits:
i. Single Counterparty: The sum of all exposures values a bank has to a single nonbank counterparty (excluding individuals, sole proprietorships and commercial undertakings majority owned by Saudi government) must not be higher than 15% of the banks available eligible capital base at all times.
ii. Group of Connected Counterparties: The sum of all exposures values a bank has to a group of connected non-bank counterparties must not be higher than 15% of the bank's available eligible capital base at all times. Subject to the following:
a. Where an individual/sole proprietorship/partnership is included within a Group of Connected Counterparties, the exposure limit specified under Section 4.1 ,iii below shall also be applicable, in addition to the overall group exposure limit,
b. The sum of all exposures values a bank has to the group of connected counterparties where a commercial undertakings majority owned by Saudi government is included can be higher than 15% of the bank's eligible capital base subject to the limit specified in 4.1 .v.
Furthermore, the sum of a bank’s exposures to the entities included within a group of connected counterparties will also be subject to the regulatory reporting requirements as specified under Section 7 of these Rules.
iii. Individual/Sole proprietor: The sum of all the exposures values a bank has to an individual or a sole proprietorship or a partnership must not be higher than 5% of the banks available eligible capital base at all times.
iv. Banks: The sum of all the exposures values a bank has to another bank must not be higher than 25% of the lending bank's available eligible capital base at all times. However. If the lending bank and/or the counterparty bank are/is Domestically - Systemically Important Banks (D-SIBs), or Globally - Systemically Important Banks (G-SIBs) as defined in Appendix VI, then the sum of all exposures of the lending Bank to its counterparty bank cannot exceed 15% of the lending bank’s available eligible capital base at all times.
v. Commercial Undertakings Majority Owned by Saudi Government: The sum of all exposures values a bank has to a commercial undertakings majority owned by Saudi Government must not be higher than 25% of the bank’s available eligible capital base at all times;
vi. Aggregate Large Exposures: The aggregate of all Large Exposures shall not exceed 6 times of the bank’s eligible capital.
4.2. Measurement of Exposures and Capital Base
The exposures must be measured as specified in Section 5 of these Rules. The eligible capital base is the effective amount of Tier 1 capital fulfilling the criteria defined in Section A of the "Finalized Guidance Document Concerning the Implementation of Basel III”.
4.3. Breaches of Limits
Any breaches of the exposure limits, must be communicated immediately to SAMA. The communication to SAMA must also include the bank's action plan to bring the exposure to within the breached limit. Furthermore, any such breaches may attract punitive supervisory action depending upon their materiality.
In exceptional circumstances where a bank’s proposed exposure to a counterpart) is likely to exceed any specific limits in these rules, the bank must obtain approval from SAMA prior to undertaking that exposure. In such cases, the bank must provide SAMA with the assessment of the following:
a. The concentration risks involved with exceeding the large exposure limits and why the proposed exposures will not unreasonably expose the bank to excessive risk; and
b. How the proposed exposure is consistent with its large exposures and risk concentration policies.
SAMA may impose additional concentration risk capital requirements on exposure amounts that exceeds any specific limits in these rules.