What is the large exposure limit for banks?

Under the Basel Committee's large-exposures standard, a bank's exposure to a single counterparty or group of connected counterparties may not exceed 25% of its Tier 1 capital, and exposures at or above 10% are reported as large. The UK applies the limit through the PRA Rulebook's Large Exposures part and Australia through APRA's prudential standard APS 221, which measures the limit against Common Equity Tier 1 capital from 1 January 2027. Banks commonly set their own single-name limits well inside it.

What happens when a loan would breach a bank's single-name limit?

The bank usually has four choices: reduce the loan to fit, share it with other lenders through a club, syndicate or participation, take it to a higher credit authority as a documented exception, or decline. Which it chooses depends on how strong the credit is, how far over the limit the deal goes and whether other lenders will take a share on acceptable terms.

What counts as a group of connected clients?

Companies under common control, such as a parent and its subsidiaries or businesses owned by the same people, and companies so economically dependent on each other that the failure of one would likely cause the failure of another, such as a supplier that earns most of its revenue from one customer. Banks apply these tests in their own policies, and the second calls for judgment.

Is a single-name limit the same as a credit limit?

No. A credit limit is the most a borrower may draw on one facility. A single-name limit is the most the bank will commit to a whole group across every facility, guarantee and derivative line, whether drawn or not. A borrower can be well within each facility limit and still leave the bank no room under the single-name limit for a new request.

// WORKED EXAMPLETHE ARITHMETIC A DECISION RESTS ON

Single-Name Limit: a Worked Example

A good credit can still be too much of one name.

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-07

// THE SHORT ANSWER

A single-name limit is the reason a bank can say no to a borrower it likes. The bank adds up everything it has committed to one group of connected companies and sets the total against the most it is willing to have riding on that group. A request that would take the total past that line has to be resized, shared or escalated, however strong the credit. The limit is a portfolio decision, not a verdict on the borrower: it protects the bank from one failure doing disproportionate damage. Above the bank's own limits sit regulatory caps in the UK and Australia.

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.

// MAKE THE CALL

Issue 10 — The Dissent. The paper recommends approval. You found the hole. You're the third vote of five — and the RM outranks you. Your call first, then the senior banker's.

Read the file →

// 01 — WHY A BANK CAPS ONE NAME

A bank's losses are survivable when they are spread. Loans across thousands of borrowers can go bad one at a time while the bank's capital absorbs each loss. A large share of that capital lent to one group is different: a single failure can take a slice of it that no year's earnings will replace. A single-name limit puts a ceiling on that one-failure loss before any individual credit decision is made. It is the reason a bank can decline, or part-decline, a request its credit officer thinks is sound.

Internal limits are commonly scaled to risk, so a strongly rated group can carry more than a weak one. The levels are each bank's own and reflect its size, capital and appetite. They sit inside a wider set of concentration limits by sector, region and product.

// 02 — HOW THE NAME IS COUNTED

Exposure to the name = committed limits, drawn and undrawn

+ contingent lines (guarantees, bonds)

+ credit equivalent of derivative lines

Name = every company connected to the borrower

Two choices decide the count. The first is what is measured. Banks' own frameworks commonly count committed limits rather than what is drawn today, because the borrower can draw a committed line at the moment it is weakest, and many count them gross of property security; the regulatory measure weights undrawn commitments by conversion factors and recognises only certain collateral. The second is who is in the name. Under the Basel large-exposures standard, which banks commonly mirror in their own policies, counterparties are connected when one controls the other or when they are so economically dependent that one's failure would likely bring down the other. That is connected exposure, and it can pull in a business with no common shareholder at all.

Above the bank's own limits, the Basel standard caps exposure to one counterparty or connected group at 25% of the bank's Tier 1 capital. The UK applies it through the PRA Rulebook and Australia through APRA's APS 221, which from 1 January 2027 measures the 25% against Common Equity Tier 1 capital. For most banks a mid-market group sits far below that line, so the limit a mid-market file meets is the bank's own.

// 03 — THE EXAMPLE

A family group, constructed for this page like every figure in it, runs a fuel distribution company, a chain of service stations held in a property company, and a small transport company, all owned by the same family. Its bank grades the group in a band whose single-name limit is US$50m. The limit and the grade bands are the example's.

Fuel distributor: revolver limit 18.0

Fuel distributor: term loan 10.0

Property company: station loans 12.0

Transport company: equipment finance 4.0

Bank guarantees to the fuel supplier 3.0

Fuel-price hedging line, credit equivalent 2.0

Exposure to the name 49.0 limit 50.0

Request: three new stations 14.0

Exposure after the deal 63.0 over by 13.0

The stations make sense, the family has equity to put in, and the cover is comfortable. None of that changes the arithmetic. The bank can keep US$50m and ask another lender to take US$13m, by a participation or by turning the station loans into a club with a second bank; it can cut the request to fit; it can take the deal to a higher authority as an exception; or it can decline. In practice a relationship manager looks for the second lender before anyone asks for an exception.

The count can move without a new dollar lent. A haulier owned by a cousin earns most of its revenue carting the distributor's fuel, so the bank's credit function may treat it as economically dependent and add its US$3m to the name. And if the group is downgraded a band, to an example limit of US$35m, the existing US$49m becomes an excess the bank would have to manage down.

// 04 — HOW IT DIFFERS FROM A CONCENTRATION LIMIT

The bank's other caps are drawn by industry, region, property type and product, and they bite independently of the name. The fuel group might sit within its own limit while the bank's fuel retail sector limit is full, and the answer is then the same: share, shrink or escalate.

A single-name limit is also not a borrower's credit limit on a facility. The facility limit is what this borrower may draw on this line. The single-name limit is what the bank will have at risk across every line to every company in the group, including lines the borrower has not drawn and hedges that are in the money for the bank today.

DEFINED IN ONE PARAGRAPH → · CONNECTED EXPOSURE → · THE QUESTION ON IT →

// 05 — WHERE IT DECIDES A FILE

It decides the shape of the offer before the credit paper is written. A relationship manager who knows the group is near its limit structures the request as a club or a participation from the start, rather than presenting a deal the bank cannot hold. It decides who approves: an exception usually needs authority above the one that would sign the credit, and a record of why. And it decides how the bank watches the group afterwards, because a name near its limit leaves no room for the next request, a new guarantee line or a downgrade.

For the borrower, a single-name limit is one of the reasons a good business ends up with a second bank. It is not a judgment that the business is weak. It is the bank telling the borrower how much of itself it will put on one name.

HOW BANKS MANAGE CREDIT RISK → · LIMIT EXCESS →

// SOURCES

The documents the statements on this page rest on. Each was opened and checked when cited.

Bank for International Settlements, Financial Stability Institute, Large exposures standard — Executive Summary — Sets the limit at 25% of Tier 1 capital for exposures to a counterparty or group of connected counterparties, defines a large exposure as 10% or more, and describes connection by control or economic interdependence — sections 02 and the FAQ.
PRA Rulebook, Large Exposures (CRR) Part, Article 395 — Limits to large exposures (version from 1 January 2022) — Caps a UK institution's exposure to a client or group of connected clients, after credit risk mitigation, at 25% of its Tier 1 capital — section 02 and the FAQ.
Australian Prudential Regulation Authority, Finalising removal of Additional Tier 1 capital (letter to ADIs, 4 December 2025), with draft APS 221 Large Exposures for 1 January 2027 — paragraph 30 — Retains APRA's existing large exposure limits but measures them on a CET1 basis from 1 January 2027; the draft standard's paragraph 30 sets the limit at 25% of Common Equity Tier 1 Capital — section 02 and the FAQ.

// QUESTIONS PEOPLE ASK

What is the large exposure limit for banks?: Under the Basel Committee's large-exposures standard, a bank's exposure to a single counterparty or group of connected counterparties may not exceed 25% of its Tier 1 capital, and exposures at or above 10% are reported as large. The UK applies the limit through the PRA Rulebook's Large Exposures part and Australia through APRA's prudential standard APS 221, which measures the limit against Common Equity Tier 1 capital from 1 January 2027. Banks commonly set their own single-name limits well inside it.
What happens when a loan would breach a bank's single-name limit?: The bank usually has four choices: reduce the loan to fit, share it with other lenders through a club, syndicate or participation, take it to a higher credit authority as a documented exception, or decline. Which it chooses depends on how strong the credit is, how far over the limit the deal goes and whether other lenders will take a share on acceptable terms.
What counts as a group of connected clients?: Companies under common control, such as a parent and its subsidiaries or businesses owned by the same people, and companies so economically dependent on each other that the failure of one would likely cause the failure of another, such as a supplier that earns most of its revenue from one customer. Banks apply these tests in their own policies, and the second calls for judgment.
Is a single-name limit the same as a credit limit?: No. A credit limit is the most a borrower may draw on one facility. A single-name limit is the most the bank will commit to a whole group across every facility, guarantee and derivative line, whether drawn or not. A borrower can be well within each facility limit and still leave the bank no room under the single-name limit for a new request.

THE IN-TRAY · ONE MINUTE

Make the call on one file.

A short file on the ground this page covers. Every option opens with how far it sits from a senior banker’s read.

THE CALL · CHAPTER 1

A five-year loan to a single-site manufacturer. No financial covenants. Security is specialised plant that only a handful of buyers could use. The credit is strong today.

Which question has the file left open?

5 MORE ON CHAPTER 1 · THE THREE QUESTIONS →WHERE DO YOU READ FROM? THE PLACEMENT →

THE GLOSSARYIN ONE PARAGRAPHSingle-name limit What is a single-name limit, and what happens when a deal would breach it?