| (9) |
Matters specifically related to connected lending or lending to a related person |
| (a) |
In order to prevent any potential abuse arising from connected lending or lending to a related person, every bank and every controlling company shall have in place robust processes, procedures, systems and board-approved policies to ensure, among other things, that— |
| (i) |
the bank or controlling company, as the case may be, lends money to a related person on an arm's-length basis, that is, no exposure to a connected or related person of a bank or controlling company shall be extended on terms or under conditions more favourable than a corresponding loan or exposure to a person not related or connected to the said reporting bank or controlling company, which terms or conditions may relate to matters such as credit assessment, tenor, interest rate or a requirement for collateral, unless the related person is an employee of the bank or controlling company and the relevant loan or exposure that is granted on beneficial terms forms part of that person's remuneration package; |
| (ii) |
no person benefiting from a particular loan or exposure is responsible for the preparation of the loan assessment or credit decision, or the subsequent management of the exposure or any relevant matter related to that exposure; |
| (iii) |
the monitoring and the reporting of individual and aggregate exposure(s) to related persons are subject to an independent credit review process; |
| (iv) |
any transaction with a related person and the write-off of any related party exposure exceeding one per cent of the bank or controlling company's qualifying common equity tier 1 capital and reserve funds, as reported in item 64 of the form BA 700, or otherwise posing special risks, is subject to the prior written approval of the board of directors of that bank or controlling company; |
| (v) |
any extension of credit to a related person is duly documented and monitored; |
| (vi) |
the bank or controlling company takes appropriate steps to control or mitigate any risk arising from an exposure granted to a related person. |
| (b) |
When the Registrar is of the opinion that the bank or controlling company's policies, processes, procedures and systems related to connected lending or lending to a related person are inadequate, the Registrar may— |
| (i) |
in addition to any other provisions contained in the Act or in these Regulations related to a bank’s exposure to a connected or related person, impose such a limit or limits in respect of the bank’s exposure to a connected or related person as the Registrar deems prudent or appropriate, which limit or limits may be in relation to the bank’s aggregate amount of qualifying capital and reserve funds or liabilities or assets or any combination thereof; |
| (ii) |
require the relevant bank or controlling company— |
| (A) |
to deduct from its capital and reserve funds such amount relating to the said transactions or exposure as may be specified in writing by the Registrar; and/or |
| (B) |
to obtain adequate collateral in respect of the relevant exposure. |
[Regulation 24(9)(b) substituted by regulation 8 of Notice No. R. 297, GG 40002, dated 20 May 2016]
| (c) |
For the purposes of this regulation 24 "related person" means a related person as defined in regulation 36(6). |
Medicines and Related Substances Act, 1965
