(1) A licensed financial institution shall not grant or permit to be outstanding an exposure to any of its related parties, unless an exposure is granted on non-preferential terms.
(2) Before an exposure is granted to any related party, an exposure shall be approved by the board of directors and assessed in accordance with any prudential standards issued by the Central Bank.
(3) For the purpose of subsection (1) “non-preferential” means made on substantially the same terms, including interest rates and collateral, as applicable, as those prevailing for comparable transactions with other persons.
(4) A licensed financial institution shall not grant an exposure to a related party where the aggregate of all financial exposures to related parties would exceed 50% of the capital base of the licensed financial institution.
(5) For the purposes of calculating capital adequacy, the amount of exposures that are in excess of the limits under subsection (4) shall be deducted from capital.