• Large exposure (LE) limits: A large exposure is exposure to a counterparty or group of connected counterparties that is equal to or greater than 10 per cent of a bank’s Large Exposure Capital Base (LECB), requiring monitoring and control frameworks designed to prevent breaching the 25 per cent limit. Banks must report and seek pre-approval for exposures beyond this limit, with limited exceptions.
• Monitoring and reporting requirements: Banks must aggregate exposures across their banking and trading books, monitor concentration risks and notify the BMA of any breaches immediately. Periodic reviews and board-level reporting on LE positions are mandatory to ensure compliance.

• Sovereign exposures: No prior approval is required for exposures to sovereigns or central banks with risk weights of 20 per cent or less. However, other sovereign exposures exceeding 25 per cent of LECB still require pre-approval.
• Public sector entities (PSEs) guaranteed by sovereigns also enjoy similar exemptions, provided credit risk mitigation standards are met.

The Basel LE framework outlines eligible CRM techniques for the treatment of maturity mismatches, on-balance sheet netting, CRM technique recognition for exposure reduction and recognition of exposures to CRM providers.

Qualifying CCP-related exposures are exempt from approval, but non-qualifying CCPs require adherence to the LE limits and reporting standards.

By refining its LE Framework, the BMA aims to bolster financial stability, ensuring robust safeguards against concentration risks and unexpected counterparty defaults.

For more information, the framework can be found here and here.