Circular 83-4 on the concentration of credit risk

Circular 83-4 of the Banque de la République d'Haïti sets the prudential limits on credit-risk concentration binding on commercial banks and on savings and housing banks, under paragraph 4 of article 43 of the decree of 14 November 1980. It defines regulatory capital by reference to the capital-adequacy circular, and defines a group of connected persons broadly: entities under common control or joint control, any shareholder holding 20% or more of a company together with that company and its subsidiaries, directors and senior managers together with their companies and their spouses, and persons whose financial difficulties would necessarily carry over to one another.

On those definitions it sets an individual limit of 20% of regulatory capital on total credit risk to one borrower or connected group, measured on a monthly average balance, and a sectoral limit of 25% of total credit risk to any one sector of activity listed in its annex, which a bank may exceed only with prior authorisation. The basis for allocating claims between sectors is the purpose for which the credit was granted rather than the borrower's own industry. This is the rule the sector-credit tables in BRH's quarterly statistical reports are compiled against. It entered into force on 30 September 2000 and replaced circular 83-3.