Exposures to Federal Government and their non-commercial or commercial entities which are fully guaranteed by the Federal Government are exempt from large exposure limits. Similarly, deals transacted by a bank on behalf of the Federal Government are also exempt. However such exposures are required to be reported in BRF 77.

Aggregate funded and unfunded exposures to UAE Local Governments and their non- commercial entities are not permitted to exceed 100% of a bank’s capital base. Within this upper limit, there is no individual cap for exposures to Local Governments however there is an upper limit of 25% for exposure to eachnon-commercial entity in the exposure group.

The commercial entities of Federal Government which are not fully guaranteed and entities owned by UAE Local Governments are subject to aggregate exposure limit of 100% and individual limit of 25% of a bank’s capital base. Stand-alone GREs that meet the definition contained in Article 2 of Circular 32/2013 (see note 4 to the Table of Maximum Large Exposure Limits) are however excluded from this group and exposures to them will be considered under (2.4) below.

In the case where a borrower or group of related borrowers belongs to the private sector or it is an entity with Government ownership of less than 50% (but not controlled by them- refer to para 1.4 above) or meets the definition of “stand-alone” GRE, an individual limit of 25% will be applicable. No aggregate limit has been specified for this category.

The Central Bank deems it undesirable that a bank lends heavily to its shareholders. Therefore, funded and unfunded exposures to a shareholder who owns 5% or more of a bank’s capital (and his related entities) shall not exceed 20% individually and 50% in aggregate.

Where a principal shareholder (for natural persons, not governments) is also a member of a bank’s board of directors, or a similar designated body, such exposures will be considered within the above aggregate exposure limits.

1. 2.6.1 Interbank exposures within UAE with original tenure of 1 year or less are exempt from individual and aggregate limits.
    
2. 2.6.2 Interbank exposures with original maturity period of 1 year or more are not allowed to exceed 30% of bank’s capital base.
    
3. 2.6.3 Exposures to banks operating outside the UAE, irrespective of their maturity are not allowed to exceed 30% of the bank’s capital base.

Whenever a bank incurs an exposure to its own parent company or to other subsidiaries of its parent, particular concerns arise. Although the management of exposures should be carried out in a fully autonomous manner according to the principles of sound banking management and without regard to any considerations other than those principles, it cannot be excluded that a certain influence on credit decisions may be exercised by persons directly or indirectly holding a qualifying participation in such a bank. As a consequence thereof, this influence may be used to the detriment of the sound and prudent management of that bank. Therefore, the Central Bank has decided to set the individual limit for an exposure at 10% in such case and to fix an aggregate limit for all such exposures at 25% of a bank’s capital base.

1. 2.8.1 A bank is not allowed to incur a funded or unfunded exposure to a member of its board of directors, or of a similar designated body, which exceeds 5% of its capital base. All such exposures, taken together must not exceed 25 % of the capital base.
2. 2.8.2 Where a member of a bank's board of directors, or of a similar designated body, is part of a group of related borrowers, total exposures to him must be included under the group. Similarly, the group's exposures must be taken into consideration when calculating the member's exposures which are not allowed to exceed 5% of a bank's capital base. Where such member is also a principal shareholder, the rules set out in Para 2.5 will apply.
3. 2.8.3 Exposures must be measured on a gross basis. However collaterals mentioned in para 1.1 are allowed to be deducted for arriving at the net exposure.
4. 2.8.4 Where a bank incurs an exposure for the purpose of real estate financing, fully registered mortgages are required.
5. 2.8.5 Exposures shall only be incurred on a commercial basis and on market terms. Moreover, the fact that the borrower is a member of the board of directors or of a similar designated body must in no way influence the bank's credit assessment and decision.
6. 2.8.5 A bank must ensure full recovery of all exposures to members of its board of directors or of a similar designated body.
7. 2.8.6 Branches of foreign banks operating in the UAE are not allowed to incur an exposure to their board members who are working abroad.
8. 2.8.7 In case a bank is obliged to book interest due from an exposure to a member of its board of directors, or of a similar designated body, in a suspense account and/or to make a bad debt provision and/or to write off an exposure, either partly or fully, the following rules shall apply:
    
   1. In case of UAE incorporated banks, the board of directors must obtain the approval of the bank's general assembly, in the presence of the bank's external auditors, and a copy of the meeting's minutes shall be filed with the Central Bank without delay.
   2. In case of branches of foreign banks operating in the U.A.E., the approval of the head office must be obtained and a copy thereof shall be filed with the Central Bank without delay.
   3. The member concerned shall not participate in the decision of the board of directors, or of a similar designated body.
   4. Banks are prohibited from granting any new facilities to a member of its board of directors, or to a member of a similar designated body, after the procedures, mentioned under (a) and (b) above, have been engaged.

Employees are defined as staff members of all levels, including executive managers. Banks are prohibited from incurring exposures to their employees other than in the form of personal loans, as defined in the Central Bank's Regulations No.29/2011. Branches of foreign banks operating in the UAE are not allowed to incur an exposure to their staff who are not working with their UAE branches.

Individually the exposures are limited to 20 months’ salary with an aggregate limit of 3% of the bank’s capital base. Housing loans extended to staff members in accordance with Central Bank Regulations and bank’s housing loan policy duly approved by their board of directors, are excluded from these limits.

In order to avoid any conflict of interest between a bank and its statutory auditors, regular consultants and lawyers, the Central Bank instructs banks not to incur any exposure to such parties. In this context, a 'regular' consultant or lawyer means any person or firm who is employed on a regular basis either under a 'retainer agreement' for a specified period or under a more general 'understanding' according to which the bank would make use of the services offered by such persons or firms for most of its needs or cases.

The following exposures are exempted from the application of Article (2) of the Circular No 32/2013 and from the individual and aggregate limits fixed in sections 2.2 to 2.9 of the Guidelines:

1. 2.11.1 Asset items constituting direct or indirect claims on/ or guaranteed by the UAE Federal government including its non-commercial public sector entities;
2. 2.11.2 Asset items constituting claims on/ or guaranteed by eligible multilateral development institutions and their affiliates as per Appendix 8 of the BASEL II Implementation Guidelines vide Circular No 27/2009.
3. 2.11.3 Asset items secured by collateral in the form of securities issued by the entities mentioned in 2.11.1 or 2.11.2 above;
4. 2.11.4 Investments made in marketable securities such as bonds/ Sukuks issued by Emirates Governments or GREs, rated not less than AA- (or equivalent) by one of the top three rating agencies, held to meet Central Bank’s liquidity requirements or held in the trading book and the intention is not to hold such bonds/ sukuks till maturity;
5. 2.11.5 Exposures secured by proper lien over deposits placed with the lending bank or its parent company or its subsidiary, under the condition that the lien can be legally enforced;
6. 2.11.6 Any other asset or security which has been specifically exempted by Central Bank from the purview of large exposure requirement.

Exposures, in either the banking or trading books, that will be in the scope of the large exposures framework can be categorized and should be measured as follows:

1. 2.12.1 Banking book on balance sheet non-derivative assets, where the exposure measure is typically determined by accounting standards;
2. 2.12.2 Banking book “traditional” off-balance sheet commitments where the exposure measure is the product of the notional amount of the commitment and the credit conversion factor (CCF) applied (refer to Annexure B-3 for additional details);
3. 2.12.3 Positions in the trading book (excluding options) where the exposure measure is based on the mark-to-market approach of the risk-based capital requirements;
4. 2.12.4 Options in the trading book where the exposure measure is based on a mark-to-market approach with a jump-to-default assumption; and
5. 2.12.5 Counterparty credit risk from derivatives, securities financing transactions, and long settlement transactions across both banking and trading books, where the counterparty credit exposure measure is determined by one of the methods of the counterparty credit risk framework.

Banks may refer to Basel standards/ Basel Team in the Central Bank for further clarification on specific issues.

Banks have to comply with the limits set above at all times, that is, not only on the reporting dates but continuously throughout each reporting period.