The following exposures shall be exempt from the large exposure limits specified under these Rules:
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| i. | Sovereign exposures and entities connected with the Saudi Government: Banks’ exposures to the Saudi Government, SAMA. Entities Connected with the Saudi Government, GCC and their central banks will be exempt from exposure limits as under:
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| | a. | Any exposure directly taken to Saudi Government, SAMA and any of the Entities Connected with the Saudi Government;
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| | b. | Any portion of an exposure guaranteed, or secured by the financial instruments issued by Saudi government or SAMA to the extent that the eligibility criteria for recognition of the credit risk mitigation are met;
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| | c. | Any exposure to the GCC central governments and their central banks;
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| | d. | Any entity falling within the scope of the above sovereign exemption will not be taken into account when determining whether two (or more) entities that are in scope must be connected to form a Group of Connected Counterparties (i.e. if two entities that are in scope of the framework, which are otherwise not connected, are controlled by or economically dependent through an exempted entity they need not be connected);
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| | e. | Any exposure to an exempted entity which is hedged by a credit derivative, will be recognized as an exposure to the counterparty providing the credit protection notwithstanding the fact that the original exposure is exempted. In addition, if a bank has an exposure to an exempted entity which is hedged by a credit derivative, the bank will have to recognize an exposure to the counterparty providing the credit protection as prescribed in Section 5.4 of these Rules, notwithstanding the fact that the original exposure is exempted. Hence the credit protection provider would still be subject to the large exposure guidelines;
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| | f. | All exposures that are subject to the sovereign exemption under this Section must be reported under the regulatory' reporting requirements if these exposures meet the minimum reporting threshold.
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| ii. | Interbank exposures. All intra-day interbank exposures will not be subject to the large exposures limits, neither for reporting purposes nor for application of the large exposure limits. However, all non-intraday interbank exposures will be subject to the large exposure limits.
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| | In addition, under stressed and exceptional circumstances, SAMA (under its discretion) may accept a breach of an interbank limit ex post, in order to help ensure stability in the interbank market;
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| iii. | Intra-group exposures: All exposures to intra-group entities of the concerned bank (within K.SA) will not be subject to the large exposures limits provided that such entities are included in the scope of accounting consolidation of the banking group. However, the non-banking subsidiaries in the financial sector will be subject to the exposure limit of 25% of the banks eligible capital.
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All other exposures of a bank, not specifically listed above as exempted, must be fully subject to the large exposure limits.
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