Division 4.2.2.3 Limitations

The following risk-relevant transactions are not subject to the restrictions on new business under points 4.1.1-4.1.6:

• Transactions with financial institutions in the context of HGAA’s liquidity book, i.e.

  • FX spot transactions (i.e. intra-day settlement limits);

  • FX outrights und swaps with a maximum tenor of […], provided that a netting and collateral agreement (ISDA and CSA), stipulating a threshold (substantive unsecured exposure) of maximum EUR […], is in place;

  • Money-market loans, deposits and (reverse) repo transactions, each with a maximum tenor of […], where the maximum amount per counterparty is limited to a total of EUR […] and the total amount granted at any time is limited to a maximum of EUR […].

  • Financial derivatives (interest-rate swaps) with a maximum tenor of […], provided that a netting and collateral agreement (ISDA and CSA), stipulating a threshold (substantive unsecured exposure) of maximum EUR […], is in place.

  HGAA must ensure that individual counterparty limits for financial institutions business are approved by the group head office risk management, with a maximum tenor of […].

• New financing and prolongations, roll-overs, restructurings and reprogrammings granted to non-performing clients (and all customers within the remit of Group/Local Task Force Rehabilitation and/or Credit Rehabilitation) with the aim and the clearly documented prospect of bringing them back to performing status and/or enabling a final recovery of the exposure, as long as the maturity of the new financing in this context is limited to […]. Any such transaction should be adequately documented, including quantitative evidence that it is the best way of preserving value for HGAA rather than merely a delay in the recognition of losses. The assumptions used for this quantitative assessment should be sufficiently conservative.

• Prolongations, roll-overs, restructurings or reprogrammings of existing performing exposures^f1 or existing performing clients (GoBs), which are objectively justified, in the interest of HGAA, and not granted a tenor of more than […]. Any such transaction should be adequately documented, including quantitative evidence that it is the best way of preserving value for HGAA rather than merely a delay in the recognition of losses. The assumptions used for this quantitative assessment should be sufficiently conservative.

• Additional financings provided to clients on the group/local watch-list with the aim and the clear, documented prospect of stabilising their financial situation (including hedging of interest-rate and FX risks), thus preventing an event of default and enabling them to return to performing status as long as this kind of financing is not granted beyond a tenor of […]. Any such transaction must be adequately documented, including quantitative evidence that it is the best way of preserving value for HGAA rather than merely a delay in the recognition of losses. The assumptions used for this quantitative assessment should be sufficiently conservative.

• Transactions

  • which are fully covered in cash, fully enforceable for collateral purposes for the entire duration of the loan contract, unencumbered by pledges in existing credits, provided the client’s rating is not worse than […], OR

  • which are fully covered by a guarantee from a financial institution (bank guarantee), provided the guarantor’s rating is no worse than […].

• Exposure increases due to fluctuations in FX rates, market values of derivatives and pricing of bonds.

• Conversion of existing FX loans to EUR loans, if the client’s accounting currency is EUR, Kuna or Convertible Mark, the total exposure is converted at the prevailing FX-rate, and the collateral terms for HGAA are the same or better.

• Business for which an offer (term sheet) mutually agreed by the responsible local risk and sale unit was sent to and accepted by HGAA clients before 1 January 2013, provided that HGAA is legally bound to disburse and this can be properly documented.

• Business conducted using funds from development banks and supranational financing institutions (e.g. EIB, EBRD, HBOR, SID, etc.) as well as subsidised loan programmes offered by sovereign/sub-sovereign agencies, provided that, as far as collateralisation is concerned, the cut-off rating […] and a maximum tenor of […] must be observed. Such subsidised loan programmes must have credit-risk mitigating features […], which is to be confirmed by the Monitoring Trustee prior to HGAA’s participation.

• Internal financings (i.e. refinancing lines) provided to other HGAA entities for repossession of collaterals and assets in the process of court auctions or sales.

• Reclassification of leases, i.e. from operating leases to financial leases, if the asset risk of the operating lease can be fully converted into counterparty risk (in other words, all of the risks and rewards incidental to ownership of the leased asset are transferred from the lessor to the lessee.

• Fulfilment of existing contracts and commitments (e.g. real estate under construction, activation of leases to go), provided the contract or local legislation does not allow for the possibility of cancelling the commitment in part or in whole, for example under one of the covenant clauses.