Circulars/Notifications - Banking Policy & Regulations Department  
 BPRD Circular No. 05 of 2016
June 21, 2016

The Presidents/Chief Executives
All Banks/ DFIs


Dear Sir /Madam,

AMENDMENT IN REGULATION R-7 OF PRUDENTIAL REGULATIONS FOR
CORPORATE/COMMERCIAL BANKING

Please refer to the Prudential Regulation R-7 of Corporate / Commercial Banking relating to the issuance of Guarantees by banks/DFIs.

2. Based on the review of Prudential Regulations in order to further improve the supervisory practices and facilitate the banks/DFIs to make the decision making process more rational in view of their risk appetite and risk profile, the following has been included at the end of Para 2 of the Regulation R-7:

“Moreover, subject to the following conditions and limits, banks/DFIs can issue guarantee against the back-to-back/counter guarantee of an unrated, or rated below ‘A’, bank/DFI that is situated in a foreign country: 

  1. The amount for single transaction shall not exceed US$500,000/-, and the aggregate amount of all such guarantees at any point in time should not exceed 5% of the bank/DFI’s own equity as disclosed in the latest audited financial statements;

  2. The banks/DFIs will have a board of directors (BoD) approved policy having internal limits for acceptance of such counter guarantees based on, inter alia, their own risk appetite and relevant risk factors. The policy may also set more conservative limits than as prescribed in para (a) above. There shall also be instituted a mechanism to monitor such exposures and limits.”

3. The above amendments are applicable with immediate effect on all banks /DFIs; however, the guarantees under this modification/change in Regulation R-7 can be issued after having in place duly approved policy/monitoring mechanism by the Board of Directors of the bank/DFI.

Please acknowledge receipt.

 



Yours truly,


Sd/-

(Shaukat Zaman)
Director

       
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