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LEX40 Large exposure rules for global systemically important banks (paras. 40.1-40.3) (effective as of 15 December 2019)
This chapter describes the tighter limits applying to exposures between global systemically important banks.
Version effective as of 15 Dec 2019
First version in the format of the consolidated framework.
40.1 The large exposure limit applied to a global systemically important bank’s (G-SIB’ s) exposure to another G-SIB is set at 15% of Tier 1 capital. The limit applies to G- SIBs as identified by the Basel Committee (see SCO40) and published annually by the Financial Stability Board (FSB). When a bank becomes a G-SIB, it and other G- SIBs must apply the 15% limit within 12 months of this event, which is the same time frame within which a bank that has become a G-SIB would need to satisfy its higher loss absorbency requirement (see RBC40.6).
40.2 Member countries are at liberty to set more stringent standards, as with any other standards approved by the Committee. In particular, the concern about contagion that has led the Committee to propose a relatively tighter limit on exposures between G-SIBs applies, in principle, at the jurisdictional level to domestic systemically important banks (D-SIBs). The Committee therefore encourages jurisdictions to consider applying stricter limits to exposures between D-SIBs and to exposures of smaller banks to G-SIBs. The same logic would also be valid for the application of tighter limits to exposures to non-bank global systemically important financial institutions, and such a limit might be considered by the Committee in the future.