Section 37, The Banking Act, 2019

(1) A bank or financial holding company shall not - (a) undertake one or more secured credit exposures to or in respect of a single person or group of connected persons; or (b) carry out any other transaction in respect of any one person or group of connected persons, or any one sector of the economy, which constitutes in the aggregate a liability to the bank amounting to more than 25% of its net own funds or a lower percentage that the central Bank may prescribe. (2) A bank or financial holding company shall not undertake an unsecured credit exposure which in the aggregate constitutes more than 10% of its net own funds. (3) For the purpose of this section, 2 or more persons constitute a group of connected persons where - (a) a direct or indirect control relationship exists among them; and (b) as a result of the structure of their relationship the other person is ultimately responsible for or benefits from the credit exposure outstanding. (4) The Central Bank- (a) may provide guidance for banks in determining whether a connection exists among a group of persons; and (b) shall, where it is uncertain that a connection exists, determine if a connection exists on an individual basis based on the facts and circumstances of a group of persons. 58 59 Limits on exposure to single person or group. No. 6 The Banking Act 2019No. 6 The Banking Act 201960 61 (5) The total of a bank's or financial holding company's credit exposures shall not exceed the percentage level of net own funds prescribed by the Central Bank having regard to the risk and vulnerability of the financial system. (6) In the case of transactions between banks, the aggregate of credit exposures and other financial guarantees or indemnities to any single bank shall not, except with the written approval of the Central Bank, exceed 30% of the net own funds of the bank undertaking such credit exposures or 30% of the net own funds of the bank to or in respect of which such facilities are extended, whichever of the two amounts is lesser. (7) A credit exposure under subsection (1) shall not be considered as secured unless it is adequately secured by collateral having a market value that exceeds the outstanding amount of the credit exposure throughout its term. (8) In computing credit exposure to a single borrower or group of connected persons, the following assets which may be held as collateral shall be deducted- (a) cash deposit; (b) lien on term deposit with the bank or financial (c) market value of treasury bills, government securities, bank securities; and (d) any other security as approved by the Central (9) Credits extended to the subsidiaries of the recipient bank shall be taken into account in the calculation of the exposure limit. (10) A bank or financial holding company whose capital adequacy ratio is less than the ratio prescribed by the Central Bank shall not receive any loan from any bank or financial holding company except with the approval of the Central Bank. (11) A bank or financial holding company shall within 5 working days- (a) report to the Central Bank where - (i) the grant of a credit exposure to a single person or group of connected persons in the aggregate exceeds 10% of the net own funds of the bank or financial holding company; or (ii) a credit exposure exceeds the limit set by this section; and (b) provide a written plan for remedying the violation within a timeframe prescribed by the (12) The aggregate borrowing of a bank or financial holding company, local and foreign shall not exceed the percentage of that bank's or financial holding company's net owned funds as may be determined by the Central Bank from time to time. (13) Where a bank contravenes any of the provisions of this section, the bank and every director of its board is liable to an administrative penalty. (14) A director or chief executive of a bank shall not be liable to the penalty in subsection (13) if he proves that the contravention was committed without his consent, connivance or that he exercised all due diligence to prevent the commission of the contravention having regard to all the circumstances. No. 6 The Banking Act 2019No. 6 The Banking Act 201962 63