Credit limits applicable to counterparty credit risk exposures are set within the exposure limits for banks and non-bank customers, which are parties to transactions.
For banks, overall exposure limits are set in accordance with the Instructions for setting and controlling exposure limits to foreign and domestic banks. With respect to foreign exchange transactions, currency swaps, currency options, deposit transactions, FRAs, interest rate swaps and principal-interest rate swaps (“fx and money market transactions”) – sub-limits limits are set, which mark the Bank’s maximum exposure to outstanding currency purchase/sale transactions (spot and forward), active (outstanding) term deposits in a foreign or Polish bank (without due interest) and other outstanding transactions mentioned above. Irrespective of the sub-limits, settlement limits have been set, which are linked to the concentration of the counterparty’s obligations towards the Bank for the settlement date agreed on when they were concluded (“value date”).
The Group also concludes derivatives contracts upon orders from its customers. With respect to treasury transaction limits (including derivatives) concluded with non-bank customers, granting such limits to a customer is a pre-requisite* for the Bank to perform a derivative transaction for the customer. The Bank requires a customer applying for a treasury limit to have credit capacity for its current exposure and additionally for the amount equal to a specific portion of the requested treasury limit, to have a risk rating and natural exposure, that is cash flows under sales and purchases in a convertible currency other than PLN.
* It is possible to conclude transaction under cash deposit, in case of lack of treasury transaction limit