Banks and Trust Companies (Large Exposures) (Amendment) Regulations 2012

¡ i EXTRAORDII,{ARY OFFICIAL GAZETTE THE BAHAMAS PUBLISHED BY AUTHORITY NASSAU (A)

BANKS AND TRUST COMPANTES (LARGE EXPOSURES) (AMENDMENT) REGULATIONS, 20T 2 Arrangement of Sections Section Citation Amendment of Regulation 2 of the prinoþl Regulations.. ....,..,.,,,.,2 Repeal and replacement of Regulation 3 of the principal Regulations...,...........,..4 Amendment of Regulation 4 of the prinoipal Regulations. ...........,..5 Amendment of Regulation 5 of the principal Regulations.. .,.......,,..5 Repeal and replaoement of Regulation 7 of the prinoipal Regulations.,.,..............5 Arnendment of Regulation 8 of the principal Regulations.. ...........,.6 Repeal and replacement of Regulation 12 of the principal Regulations,....,..........7 Repeal and replacement of Regulation 16 of the principal Regulations................7

MINISTRY OF FINANÇE S.I. No. 26 o12Ql2 BANKS AND TRUST COMPANIES REGULATIONACT (CHAPTER 316) BANKS AND TRUST COMPANIES (LARGE EXPOSURES) (AMENDMENT) REGULATIONS, 201 2 The Governor of the Central Bank of The Bahamas, in exercise of the polvers conferred by section 24 of the Banks.¡nd Trust Companies Regutâúion Act, makes the following regulations - Gltation. These Regulations, whioh amend the Banks and Trust Companies (Large Exposures) Regulationsr, may be cited as the Banks and Trust companies (Large Exposures) (Amendment) Regulations, 2012' Amendment of regulation 2 of the princlpal Regulations. Regulation 2 of the principal Regulations is amended by - (a) the repeal and replaoement of the words "capital base" together with the accompanying definition as follows - "'rcapltal baset' means the total of shareholders' funds plus other capital items permitted by the Cenhal Bank and subject to any adjustment or deduction required by the Central Bank and reported in the most recent Statement of Capital Adequacy schedule of the Excel Reporting System or in such form as determined by the Cenhal Bank;"; (b) the repeal and replacement of the word "exppsure" together with its accompanying definition as follows - ttstexposuret' 1¡g¿¡5 - (i) claims on a counterparly including actual claims and potential claims which would arise from the'drawing 2. Page - 2

down in full of undrawn advised facilities, whether revocable, irrevocable, conditional or unconditional, which the licensee has committed itself to provide and claims which the licensee has committed itself to purchase or underwrite; (ii) bontingent liabìlities arising in the normal course of business and liabilities that would arise from the drawing down of undrawn advised facilities; (iii) holdings of equity capital, bonds, bills or other financial instruments; (iv) any other assets that constitute a claim on a counterparty by the licensee and which are not included in sub-subparagraphs (i), (ii), or (iii);"; the repeal and replacement of the word "licensee" together with its accompanying def,rnition as follows

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• (Ð means any bank or trust company which is incorporated in 'Ihe Bahamas and holds a licence granted under sectiolt 4 of the Act; and (ii) does not include nominee trust companies and restricted banks and or trust companies whose operations are limited to conducting busíness either on behalf of clients who are members of the same family or for specified persons which are named in the licence;"; the repeal and replacement of the words "Zone A countries" together with.the aocompanying definition as follows
• 'í'ZorreA countries" means any country which is a full member of the Organization for Economic Co-operation and Development together with any country which has concluded lending arrangements with the Intemational Monetary Fund associated with the General Agreement to Borrow but excludes those oountries
• (Ð which have rescheduled their extemal debts during the preceding five years; (ii) whose rating for long-term liabilities in foreign currencies is lower than investment grade; and (iii) which have no rating and whose yield to maturity and remaining duration are not comparable with those of long-term liabilities with an investment grade rating;"; { À È I ¡il gt I I i ì i I 1 l i l (c) (d) Page - 3

(e) the amendment of the definition of the words 'þlated party" by the (Ð deletion wherever it appears ofthe word "above"; the deletion of the words "connected party" together with the accompanying definition; the insertion in the appropriate alphabetical order of the following words and definitions 6'r'control" - means the power, whether arising from ownership, contract, guarantee, agreement, or othelwise, whereby one person can direct the affairs ofanother; ttgroup of connected parties" means two or more individual counterparties that constitute a single risk and includes - (Ð any parly that, either direetly or indirectly, conhols the countefparty; (iÐ any party that is controlled, either directly or indirectly, by any party that controls, either directly or indirectly, the counterpafy; (iiÐ a subsidiary or associate company of the counterparty; (iv) dridctors, executive offrcers, senior staff, and contolling shareholders, of the counterparty; and (e) (v) directors, executive ofìñcers, senior staffl and conholling shareholders, of any person identified in (i), (ii) and or (iii); ú'Zone A banks" means banks that are located in Zone A countries; "Zone A central banks" mean& çentral banks located in Zone A countries; "Zone A central governmentst' means cenfal govemments located in Zone A countries; '37,one B central bankst' means cefltral banks located in Zone B countries; "Zone B csntral governmentst' means central govemments located in Zone B counhies; "Zone B countrles" means those counhies which are not included in Zone 4,". Repeal and replacement of Regulatlon 3 of the principal Regulations. Regulation 3 of the principal Regulations is repealed and replaced as follows - "3, Single Exposure Limit, 3, Page - 4

(1) No licensee shall incur exposures, on an aggregate basis, to any individual counterparty or group of connected parties, which exceed fwenty-five percent of the licensee's capital base, (2) No licensee shall hold non-capital investments in securities of a single issuer which exceed ten percent of the licensee's capital base.", Amendment of Regulation 4 of the pr¡nc¡pal Regulatlons. Regulation 4 of the principal Regulations is amended - (a) by the repeal and replacement of paragraph ( I ) as follows - "(1) No licensee shall incur exposures to its related parties which in aggregate exceed fifteen percent of the licensee's capital base,"; and (b) in paragraph (2) - (Ð by the deletion of the word "arms" and the substitution of the word t'arm's"; and (ii) by the insertion in sub-paragraph (a) immediately after the semi-colon, of the word "and". Amendment of Regulatlon 5 of the principal Regulations. Regulation 5 of the principle Regulations is amended by the deletion of the word "concessionary" and the substitution of the word "concessive". Repeal and replacement of Regulation 7 of the prlnclpal Regulations. Regulation 7 of the principal Regulations is repealed and replaced by the following - ('7, Exempt Exposures. The following exposures shall be exempt from the limits outlined in regulations 3,4 and6 - (a) exposures to the Government of The Bahamas and non-corrmercial Bahamian governmental institutions or secured by securities and or guarantees of the Govemment of The Bahamas; (b) exposures toZone Acentral banks; (c) exposures to Zone A central governnrents which are rated high grade or higher by two of the major credit rating agencies for foreign cunency debt; 4. 5. 6, Page - 5

(d) exposures secured by securities and or guarantees from Zone A central governments which are rated high grade or higher by two of the major credit rating agencies for foreign currency debt; (e) short-term interbank deposits of not nore than six months maturity, booked with Zone Abanks; and (Ð exposures which are fully collateralized throughout their tenure by cash deposits, including certihcates of deposit and equivalent instruments issued by the lending bank, held by the lender with the specific right of offset, where the release of the deposit is conditional on the repayment of the related extensions of credit.". Amendment of Regulatlon I of the pr¡nc¡pal Regulatlons. Regulation 8 of the principal Regulations is amended - (a) by re-lettering the existing sub-paragraph (a) as sub-paragraph (b); (b) by the insertion of a new sublaragraph (a) as follows - ""(a) exposures to Zone B central governments and cenhal banks which are denominated in the country's local cunency and funded by liabilities in the same ourrency rated high grade or higher by two of the major credit rating agencies for foreign currency debt;"; 7. (c) by the repeal and replacement of the existing sub-paragraphs (b), (c), (d) and (e) as follows - ""(c) exposures which are supported by a parental guarantee acceptable to the Inspector; (d) underwriting exposures which do not exceed 90 days duration, Any residual holdings of securities, which are held for more than 90 days, shall not be treated as exempt and shall be subject to the limits outlined in regulations 3, 4 and (e) 6; off-balance sheet exposures to banks which are acceptable to the Inspector; and exposures to related parties where the licensee or the related party is fulfilling a treasury role on behalf of the group or managing liquidity across the group and the conditions set by the Inspector have been met,". (Ð Page - 6

8. Repeal and replacement of Regulatlon 12 of the prlnclpal Regulatlons. Regulation 12 of the principal Regulations is repealed and replaced by the following- ""12 Notlficatlon of breach. A licensee shall, on þecoming aware of any breach of regulations 3, 4 or 6 (a)

notify the Inspector and provide the particulars ofthe breach in the manner determined by the Inspector within two working days after breaching the regulations; and take immediate action to bring the exposure within the established limits as soon as practicable but no later than ten working days after breaohing the limits,". Repeal and replacement of Regulatlon l6 of the prlncipal Regulgtlons. Regulation 16 of the principal Regr.rlations is repealed and replaced by the following - "16 Penalty for non.compllance. (1) Subject to pæagraph (2), the Central Bank may impose a frne not exceeding frve thowand dollars where a lioensee fails tg comply with the provisions of any of regulations 3,4,6,11 or 12. (2) The Govemor may, if he thinks fit, exempt a licensee from the provisions of this regrrlation,". (b) Made this 2"d day of Marchr20l2. Signed \ryENDY CRAIGG Governor of the Central Bank of The Bahamas Page - 7 d,tr ;jj 'it '¿ 'a