Regulatory Alerts2018-02-15
Directive No. 04/2018 on the Treatment of Collaterals and Guarantees by Banks
The National Bank of Rwanda issued Directive No. 04/2018 to standardize how banks value and deduct collaterals and guarantees when calculating specific provisions. The regulation specifies deduction caps ranging from 30% to 100% based on asset type, requiring full deduction for cash-backed securities and government guarantees, while allowing up to 70% for residential mortgages and 50% for commercial mortgages and traded securities. Banks must dispose of any collateral acquired through auctioning within one year, recording its value at the latest market price after applying applicable haircuts and central bank discounts.
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