Regulatory Alerts2004-01-28
Set-off and Netting under Regulations 12 and 23 of the Regulations Relating to Banks
The Office of the Registrar of Banks mandates that all banks must ensure their set-off and netting agreements strictly satisfy the legal enforceability requirements of Regulations 12 and 23 of the Regulations Relating to Banks. Banks and their boards of directors bear full responsibility for verifying that these contractual arrangements will withstand legal scrutiny across all relevant jurisdictions, as reliance on standard market templates like ISDA agreements does not automatically guarantee compliance with prudential capital relief provisions. This directive confirms that meeting these minimum legal standards is mandatory for banks to legitimately net transactions for capital-adequacy purposes and aligns domestic prudential rules with international Basel Committee guidelines.