REGULATION ON LIMITS ON INTER-BANK EXPOSURES

ަރާގްނައ 2015 ްޓްސަގޮއ 25 - 1436 ާދިޢަޤްލުޛ 10 :ުޚީރާތ 251 :ުދަދައ 44 :ްމުއިލޮވ 2015/R-165 :ުުރަބްނަނ ުދިއާވަގ REGULATION ON LIMITS ON INTER-BANK EXPOSURES ްނުކަތްސީފޮއ ެގުރާކުރަސ ،ިއާކަތުދިއާވަގ ،ިއާކަތުނޫނާޤ ،ީނަރުކުޢިއާޝ ިއަގުޓެޒެގ  ްސީފޮއ ެގާޔްއިރޫހްމުޖްލުސީއަރ .ެވެކަތްނުޔިލ ަދަފ ްއަތްނާޔަބްސޫނ ،ިއާކަތްނުވެންނެދ ،ިއާކަތްނާލުޢިއ ާވްއުރެނ .ެވެއުހަވުދ ިތަފްސާރުބ ިއާހަވުދ ަމޯހ ެގްއެއާތުފަހ ެމްނޮކ ީނަރުކުޢިއާޝ ްޓެޒެގ  ުގަމުނާފުރުކަތުޑޮބ ެގުމުވްއުނޮފ ްއަތްނުޔިލ ާވްއުނޮފ ްށަމުވްއެރުކ ުޢިއާޝ ިއަގުޓެޒެގ ެގުހަވުދ ަމޯހ  .ެޖްއާރިހެވިދ ،ެލާމ ެގ 12:00 ުރުދްނެމ ެގުހަވުދ ިތަފްސާރުބ ެގާތުފަހ ީރުކ ،ީކަތުގަވ ުހަފެމްނެއ ްށަމުވްއެރުކ ުޢިއާޝ ިއަގުޓެޒެގ ެގުހަވުދ ިތަފްސާރުބ ިދައ .ެވެންނިރުކ 3336137 ، 3323701 :ުނޯފ ާދްނުމަގނިހ ،ީކަތުގަވ ުހަފެމްނެއ ެގުމުވްއުނޮފ ްއަތްނުޔިލ ާވްއުނޮފ 3325500 :ްސްކެފ ްއަތްނުޔިލ .ެވެންނިރުކ ެގ 12:00 ުރުދްނެމ ެގުހަވުދ ަރާގްނައ ެގާތުފަހ .ެވެމެދެއ ްނުވްއުނޮފ ްށަހެރްޑެއ ްލިއެމ.ީއ ިމ gazette@po.gov.mv gazette@po.gov.mv :ްލިއެމީއ ީނާވްނަންނުހ ިއަފެޔިލ ްއަތްނުޔިލ ާވްއުނޮފ ްށަމުވްއެރުކުޢިއާޝ ިއަގުޓެޒެގ  www.gazette.gov.mv :ްޓިއަސްބެވ .ެވެންނުޓްނޮފ ާމުރަފ ިއަގުޑރާވ ްޓްފޮސޯރްކިއަމ PRUDENTIAL REGULATION REGULATION ON LIMITS ON INTER-BANK EXPOSURES Arrangement of Paragraphs PART I Preliminary PARAGRAPH 1. Introduction......................................................................................................................................4 2. Title..................................................................................................................................................4 3. Application ......................................................................................................................................4 4. Commencement......................................................................................................................................4 5. Definitions........................................................................................................................................4 PART II Statement of Policy PARAGRAPH 1. Purpose.............................................................................................................................................5 2. Responsibility....................................................................................................................................5 PART III Implementation and Specific Requirements PARAGRAPH 1. Limits and Requirements.................................................................................................................5 2. Security............................................................................................................................................6 3. Nonconforming Exposures ..............................................................................................................6 4. Reporting Requirements..................................................................................................................6 PART IV Corrective Measures PARAGRAPH 1. Remedial Measures and Sanctions...................................................................................................6 3 PART I: PRELIMINARY 1: Introduction – This Regulation is issued pursuant to Section 66 of Law No. 24/2010 (Maldives Banking Act). 2: Title – This Regulation shall be cited as "Regulation on Limits on Inter-Bank Exposures.” 3: Application – This Regulation applies to all banks licensed under the Maldives Banking Act (Law no. 24/2010). 4: Commencement – This Regulation shall come into effect on 25 August 2015. 5: Definitions – The terms and expressions used in this Regulation shall, except where expressly defined below in this Regulation or where the context otherwise requires, have the same respective meaning as in the Maldives Banking Act (Law no. 24/2010): (1) "Act" – means the Maldives Banking Act (Law no. 24/2010). (2) "bank" – means a party holding a license or permit under the Act, to engage in the banking business; all or part of the banking activities listed in Section 25 of the Act. (3) "capital base" – means Capital Base as defined in MMA Prudential Regulation on Capital Adequacy. (4) "exposure" – for purposes of this regulation includes the following: (a) all deposits in another bank; (b) all loans or advances to another bank; (c) all purchases of securities or other assets from another bank that are subject to an agreement to repurchase; (d) all guarantees, acceptances, or letters of credit issued on behalf of another bank; (e) all purchases of or investments in securities issued by the other bank or institution; (f) all securities issued by the other bank or institutions and accepted as collateral. 4 (5) "inter-bank exposure" – means any exposure, between a bank in the Maldives and any other domestic or foreign bank or branch operating in the Maldives; may also be referred to as inter-bank placements. (6) "MMA" – means the Maldives Monetary Authority established under the Law no. 6/81 (Maldives Monetary Authority Act). PART II: STATEMENT OF POLICY 1: Purpose - The purpose of this regulation is to limit the potential for contagion risk to the aggregate banking system in the Maldives posed when one bank fails or is unable to repay its obligations to other banks in the Maldives as and when they are due. 2: Responsibility – It is the responsibility of the board of directors of each bank to adopt policies and establish procedures to ensure that all exposures resulting from inter-bank placements: (a) give highest priority to the safety and soundness of the bank making the placement and incurring the exposure, (b) are made and administered according to prudent lending and investment practices, and (c) fully comply with the limitations set forth in this regulation. At a minimum, the policy shall set forth the terms and conditions for all inter-bank placements, including any internal limitations that may be equivalent to or more stringent than those specified in this regulation, and shall further establish the criteria for selecting which banks are acceptable for inter-bank placements and which are not. PART III: IMPLEMENTATION AND SPECIFIC REQUIREMENTS 1: Limits and Requirements – The following limits and requirements shall apply: (a) Any inter-bank exposure having a term or settlement period more than 7 calendar days shall not exceed 30% of a bank’s capital base. Further, any amount of such exposure that exceeds 15% of a bank’s capital base must be fully secured at all times as defined in paragraph 2 below. (b) For any inter-bank exposure having a term or settlement period of 7 calendar days or less, the 30% exposure limitation and security requirement stated in (a) above shall not apply. However, if such exposure is renewed, rolled-over or extended and the MMA determines that such renewal, roll-over or extension results in an exposure that has, in substance, a settlement period of more than 7 days, then the exposure will be treated as provided in (a) above and be subject to the requirements therein. (c) No bank shall hold, at any time, bankers' acceptances issued (i.e. 'accepted') by another bank which, in the aggregate, exceed 200% of the capital base of the bank holding such acceptances. 5 2: Security - For purposes of paragraph 1 above, eligible security shall include bills, notes, bonds, or other similar evidences of indebtedness issued by the national government of the Republic of the Maldives, or which an agency or instrumentality of the Republic of the Maldives has unconditionally agreed to purchase or has unconditionally guaranteed as to payment of both principal and interest. 3: Nonconforming exposures – (a) If an inter-bank exposure complies with the limits in paragraph 1 when made but later fails to comply because: (i) the exposed bank’s capital base declines, or (ii) the other bank merges with another bank to which this bank is also exposed, or (iii) the lending limit or capital base rules change, or (iv) the collateral securing the exposure fails to qualify, then the exposure will be treated as ‘nonconforming.’ (b) if an inter-bank exposure becomes ‘nonconforming’ for the reasons stated in (a) (i-iii) above, then the bank must promptly take all reasonable actions to bring the exposure into compliance unless doing so would be inconsistent with safe and sound banking practices. (c) if an exposure becomes ‘nonconforming’ for the reason stated in (a)(iv), then the bank is required to act promptly to bring the exposure into compliance within 10 calendar days, unless judicial proceedings, regulatory actions, or other circumstances beyond the bank's reasonable control prevent taking action. 4: Reporting Requirements – Each bank shall submit returns in respect of exposures in the form and frequency as the MMA may prescribe. PART IV: CORRECTIVE MEASURES 1: Remedial measures and sanctions – If a bank, its administrators, or any other person associated with the bank violates any provision of this regulation, or fails to comply with the instructions and reporting requirements in this regulation, the MMA may take any one or more of the corrective measures or impose any administrative penalties as provided in the Act. Such measures and penalties may include, any or all of the following – (a) Issue a warning to the bank; (b) Enter into an informal agreement with the bank for correcting violations and any unsafe and unsound practices and conditions; (c) Issue an order to the bank requiring it to cease and desist from particular actions and further to take affirmative actions to correct violations and any unsafe and unsound practices and conditions; (d) Require the board of directors to inject additional capital funds; 6 (e) Restrict the scope of activities of the bank including imposing limitations on any foreign exchange activities, granting of credit, making of investments, acceptance of deposits, borrowing of money, or other activities as the MMA may deem appropriate; (f) Suspend access to the credit facilities of the MMA; (g) Require the suspension or removal of any directors or executive officers; (h) Appoint an advisor or a conservator; (i) Impose an administrative penalty on the bank or any of its directors, executive officers or managers; or (j) Hold personally liable and seek restitution from, as the law allows, any directors, executive officers or major shareholders of the bank; or (k) Suspend or revoke the bank's license. Questions relating to this regulation should be addressed to the Head of Financial Stability, Maldives Monetary Authority. 7 ްއަތިޑަގ ާވްއުނޮފ ްށަރުދ ޭލިހ ްއަތްނުވެގްނެއ ިއާކަތްނުވެންނެދ ިއާކަތްްނާލުޢިއ ެގުޓެޒެގ . 1 . 2 ްށައ 4:00 ްނ 3:30 ުރީވަހ ، ްށައ 1:00 ްނ 12:30 ުރުދްނެމ ުކަހަވުދ ެމްނޮކ - ްށަލަޔިނ ެގުހަވުދ ިތަފްސާރުބ ްނިއަތްއީދާއ ްށައ 4:00 ްނ 3:30 ުރީވަހ ، ްށައ 11:30 ްނ 11:00 ުނުދނެހ - ްސަވުދ ުރުކުހ ްށައ 4:00 ްނ 3:30 ުރީވަހ - ްސަވުދ ުރިހިނޮހ ...yourfriendonair. ްށައ 7:45 ްނ 7:00 ުކައެރ ެމްނޮކ ެގާތުފަހ