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REGULATION-II
LIMIT ON BANK’S EXPOSURE AGAINST CONTINGENT LIABILITIES
Contingent liabilities of a bank shall
not exceed at any point of time 10 times of its paid up capital and general reserves (free
of losses). In case of branches of foreign banks operating in Pakistan capital will mean
capital maintained under Section 13(3) of the Banking Companies Ordinance, 1962. Following
shall not constitute contingent liabilities for the purpose of this regulation:--
(a) Bills for collection and;
(b) Forward foreign exchange contracts;
(c) 22Obligations under Letters of Credit and Letters of Guarantee to the
extent of cash margin retained by the bank, and;
(d) Letter of Credit/Guarantee issued on behalf of the
Federal/Provincial Government and established through State Bank of Pakistan provided
payment is guaranteed.
Weightage of 50% shall be given to bid/mobilization advance/performance bonds.
2. A guarantee which does not appear in the books maintained in
Pakistan by a foreign bank and if invoked does not require the said bank in Pakistan to
honour the same, shall not be counted towards determining exposure for the purpose of this
regulation.
3.Claims other than those related to provision of facilities (fund
based or non-fund based) on banks’ constituents may also be excluded for the purpose
of this regulation.
