Annexure B-2

C 32/2013 GUI

EXPLANATORY NOTES TO SPECIAL BANKING RETURN FORMS (BRFs) FOR LARGE EXPOSURES
(Annexure to Circular No 32/2013)

General Instructions for Completing Special Banking Return Forms for Large Exposures

Banks must refer to Circular No 32/2013 along with Guidelines to Monitoring of Large Exposures and Explanatory Notes to BRFs in order to ensure correct submission of Special Banking Return Forms on Large Exposures.
The Special BRFs form a part of BRF system and should be uploaded accordingly. BRF 39 is monthly report and BRFs 76 to 87 are quarterly reports which must be submitted along with monthly and quarterly batches as instructed through BRF Platform.
Except for those exposures secured by cash collaterals, bank guarantees/ stand-by LCs and guarantee from the Federal Government, all other exposures are required to be reported on gross basis.
BRFs specified hereunder are in the summary form, listing entity/ group exposures and aggregate exposures. Banks however must maintain full details of such exposures including approvals of various types of facilities to group/ relatedentities, collaterals held, status of the accounts, variations and reductions in the exposures, CCF calculations, etc. which will be reviewed by the Central Bank Examiners from time to time.
All large exposures are required to be reported on consolidated basis (including foreign branches and all financial subsidiaries domestic or international) as per Basel II capital framework. Lending to the same entity by group members that are consolidated, should be reported together and calculated as a percentage of the consolidated capital base. Foreign banks however need not report exposures taken by their head offices or overseas branches.

BRF- 39 Large Exposures at 10% / 15% of the Bank's Capital

A large exposure is defined as those funded and unfunded outstandings and unused committed limits (less provisions, cash collaterals, bank guarantees and Federal Government guarantee) to a single borrower or his group which in total is equal to or exceeds 10% of the bank’s capital base or AED 750 Mln whichever is lower in case of resident borrowers. For Non-Resident borrowers, the above exposure amount has been fixed at 5% of capital base or AED 500 Million whichever is lower for reporting purposes.

In case of group accounts, banks must report the name of the group along with names of 5 largest borrowing entities within the group. Exposures within the banking Group are not to be reported in this form.

Unfunded exposure should include committed unused limits of the borrower with adjustments for Credit Conversion Factor (CCF) in accordance with Annexure B-3.

BRF- 76 Aggregate Large Exposure Summary Sheet

This report lists summary of all large exposures specified in the Article (2) of the Circular on Table of Maximum Large Exposure Limits. The amounts are derived from BRFs 77 to 87 in order to monitor the aggregate exposures under individual categories.

BRF 77	UAE Federal Government and their Non-Commercial Public Sector Entities: Although exempted, reporting under the category is required for information purposes.Exposure to Federal Government will include deals transacted on behalf of Federal Government.
BRF 78	UAE Local Governments and their Non-Commercial Entities: Aggregate exposure under this category should not exceed 100% of capital base. The upper limit for individual non-commercial entities is 25%. Borrowing entities falling under this category should be listed Emirate wise. For the purpose of aggregation, all exposures under this category should be reported whether individually they exceed the specified exposure limit or not.
BRF 79	Commercial Entities of Federal and Local Governments (Excluding stand-alone GREs): This category includes Government Related Enterprises (GREs). Except for “stand alone” GREs as below, all exposures to relative GREs should be reported whether individually they exceed the specified exposure limit or not.
BRF 80	Stand-alone Commercial Entities of Federal and Local Governments: These include Government Related Entities (GREs) which are profitable and can service their debt obligations from their own resources/ operations, without need for any implicit or explicit Government support and hold a rating of not less than BBB- (or equivalent) from one of the top three rating agencies. These will be treated at par with “single borrower” with individual exposure limit of 25% of bank’s capital. No aggregation is required.
BRF 81	Single Borrower or a Group of Related Borrowers: This category will include private sector borrowers and companies where the government ownership of shares is less than 50%. In such cases, exposures to an entity or group should not exceed 25% of capital base. No specific aggregate limit has been fixed for this category. Lending to non-residents should be shown separately in the space provided if they exceed specified limit under these regulations.
BRF 82	Major Shareholders and Their Related Entities: Where exposures to major shareholders and their entities exceed 20% of bank’s capital individually and 50% collectively. If a board member or his entities fall under the major shareholder category, his exposure should be listed here. All exposures to major shareholders whether they exceed the regulatory limit or not, should be reported for calculating the aggregate exposure.
BRF 83 BRF 84	Domestic and Overseas Interbank Exposures: Inter-bank exposures are exempted from the aggregate limit. However exposures to individual banks for a period over 1 year are not allowed to exceed 30% of bank’s capital base. Local banks should report lending by their overseas branches, where applicable. Foreign banks should report only on UAE operations.
BRF 85	LE to Bank’s Subsidiaries and its Affiliates: Exposures to them are subject to 10% individual limit and 25% aggregate limit. In case a consolidated subsidiary or affiliate falls under other BRF as well, such exposures should be reported only in BRF-1.
BRF 86	LE to Board Members and Their Related Entities: Their exposure limits are 5% of the bank’s capital base as individual and 25% in aggregate. All exposures to board members whether they exceed the regulatory limit or not, should be reported for calculating the aggregate exposure. If a board member is also a major shareholder of the bank, his exposure should be reported in BRF 86.
BRF 87	LE to Bank Staff: Exposure to staff members should be incurred in accordance with Regulations No 29/2011 of 23/02/2011. Aggregate of such exposures should not exceed 3% of the bank’s capital base. Staff housing loans are exempted from the computation of large exposures vide Notice No 30/98 dated 17/1/1998 but those outside the bank’s housing loan policy should be reported.