Banks Act, 1990 (Act No. 94 of 1990)RegulationsRegulations relating to Banks' Financial Instrument TradingChapter 6 : Large Exposures22. Large-exposure requirements ("LER") |
| (1) | A bank shall on a daily basis calculate its risk exposures arising from large exposures to a third party or a group of connected third parties in accordance with regulation 23. |
| (2) | Exposures mean the amount at risk before application of the appropriate position-risk requirement CPRW) or counterparty-risk requirement ("CRR") with regard to— |
| (a) | the excess, if positive, of the market value of a bank's long positions over its short positions in all the financial instruments issued by a third party; |
| (b) | in the case of underwriting commitments, the market value of a bank's net exposure to a third party; |
| (c) | counterparty exposures arising from unsettled securities transactions, repurchase agreements, resale agreements, securities lending and borrowing transactions, derivatives and other financial instruments, calculated either in accordance with Method 1 or Method 2, as set out in regulations 14 and 15, respectively, of the position-risk requirement or in accordance with Chapter 7 |
| (d) | all other assets and off-balance-sheet items constituting claims on third parties (for example, commissions and fees receivable). |
| (3) | Exposures that are excluded from the definition of large exposures and which a bank shall exclude from its LER calculations are the following: |
| (a) | Exposures or guarantees underwritten by the Government of the Republic of South Africa or the South African Reserve Bank; |
| (b) | exposures secured by collateral consisting of securities issued by the Government of the Republic of South Africa or the South African Reserve Bank; |
| (c) | exposures secured by cash collateral deposited with the bank, the bank's connected credit institutions or the Trustees of the Johannesburg Stock Exchange on behalf of the bank or the bank's connected credit institutions; and |
| (d) | exposures with maturities of less than one year to regulated South African financial and banking institutions, recognised clearing houses, exchanges and approved exchanges in financial instruments that do not constitute their capital requirements. |
| (4) | For the purposes of this regulation and regulation 23, groups of connected third parties mean two or more corporates or natural persons that are interconnected to the extent that the financial performance or soundness of one would be materially affected by the financial performance or soundness of the other or others. This interconnectivity would be evidenced, inter alia, when one corporate derives more than 20 per cent of its earnings from another or when counterparties are linked by cross-guarantees. |