Connected exposure
What is connected exposure, and why do banks group related borrowers together?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
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Connected exposure is the total a bank is owed by a group of borrowers linked by ownership, control or economic dependence, so that one's failure would likely bring down the others. Banks add the group together when testing a lending authority, a single-name limit or a regulatory large-exposure limit. A family that owns a cold store and a transport company through two separate companies is one exposure, however a credit paper splits it, and finding every member of the group is often the hard part.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
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