The Basel large exposures framework addresses the concentration risk that could arise as a result of a bank’s exposures to its counter-parties
The large exposure regulations in India have been assessed as “Compliant” with the Basel large exposures (LEX) framework, according to the findings of the Regulatory Consistency Assessment Programme (RCAP) of the Basel Committee on Banking Supervision (BCBS). The Committee assessed this compliance as of the highest possible grade.
“Overall, as of June 7, 2019, the large exposures regulations in India are assessed as Compliant with the Basel large exposures framework… The components were all assessed as Compliant: scope and definition of the framework, minimum requirements and value of exposures,” the Basel Committee report said.
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The LEX framework is aimed at addressing the concentration risk that could arise as a result of a bank’s exposures to its counter-parties, result in concentration of its assets to a single counter-party or a group of connected counter-parties.
In some other respects, the Indian regulations are stricter than the Basel large exposures framework. For example, banks’ exposures to global systemically important banks are subject to stricter limits, in line with the letter and spirit of the Basel Guidelines, and the scope of application of the Indian standards is wider than just the internationally active banks covered by the Basel framework.
Source: The Hindu BusinessLine
