BDL amends rules for placements abroad

Banks can now make cross-border placements with affiliates with credit rating below ‘BBB’

The Central Bank has amended regulations governing local banks and financial institutions’ dealings with non-resident sectors, thereby allowing them to undertake cross border placements with their affiliates abroad even if an affiliate's credit rating is lower than ‘BBB’.

The amendment was published in an intermediate decision issued on July 21, based on a BDL central committee decision taken on the 18th.

The original regulations had prohibited resident banks and financial institutions, from making treasury placements abroad, other than operating accounts, except at correspondents rated ‘BBB’ and above.

The decision stipulates that ‘Net Credit Exposure’ to any one affiliate must not exceed 25 percent of the bank’s or financial institution’s consolidated assets.

The decision said that Net Credit Exposure includes treasury placements, all cash deposits including those in current and operating accounts, cash collateral, and placements in financial instruments issued by the correspondent.

The Central Bank may, according to the decision, exempt a correspondent from the provisions of this amendment on a case-by-case basis based for considerations are justified.