Connected exposures are a bank’s exposures to those who are closely related to the bank, such as a bank’s owners or other entities which the bank has influence over.
Director of Prudential Policy Kate Le Quesne says our Connected Exposures Policy sets out requirements to manage the associated risks to locally incorporated banks, such as conflicts of interest, and a way to measure the bank’s exposures to connected entities.
“These rules support financial stability by reducing the risk of a bank getting into trouble due to the failure of a connected entity,” Ms Le Quesne says.
“The review is partly routine as well as a response to requests to resolve ambiguities in the wording of the current policy. The changes to the policy align it with the existing capital adequacy framework and respond to a recommendation from the International Monetary Fund’s Financial Sector Assessment Programme review in 2017.”
We now intend to progress with the proposals from our November 2021 Consultation Paper, with some amendments following stakeholder feedback. The rationale for these changes is set out in the Response to Submissions statement along with a summary of stakeholder feedback. The specific wording for the proposed requirements is set out in the Exposure Draft.
We invite interested parties to submit comments on any technical or workability issues in the Exposure Draft to: by 8 March 2023.
