Regulatory Alerts2014-02-24
Added · Updated
Policy Rule on the Treatment of Concentration Risk in Emerging Countries
The policy rule requires banks and investment firms to adequately control concentration risk in countries with non-negligible repayment and transformation problems. It mandates the application of specific risk controls and capital surcharges for country exposures exceeding 5% of the balance sheet total and total off-balance-sheet items. Institutions must report these measures in their Internal Capital Adequacy Assessment Process (ICAAP) for assessment via the Supervisory Review and Evaluation Process (SREP). The rule applies to exposures where a country risk event is probable, utilizing weighting factors and absolute limits to prevent diversification into higher-risk jurisdictions.
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