On a solo basis: Standard Chartered Bank (the "principal firm(s)")

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1 To: On a solo basis: Standard Chartered Bank (the "principal firm(s)") On a consolidated basis: Standard Chartered Bank and all the entities in the Appendix that constitute the principal firm's UK consolidation group and each non-eea sub-group Each other firm in the Standard Chartered Group (the "group") as at the date of this direction, that falls into BIPRU 8.1.1R (collectively the "firms") Ref: Of: 1 Aldermanbury Square, London, EC2V 7SB Date: 1 January 2008 Handbook Version as in force at the date of this Direction Power 1. This direction is given by the FSA under section 148 of the Act on 21 June Duration 2. This direction takes effect on 1 January Rules Waived/Modified 3. The FSA directs that the rules listed below and, where applicable, in Schedule 2 apply to the firms with the modifications shown or, where indicated, do not apply to the firms. Chapter/Rule GENPRU R Modification/Waiver This rule is modified as follows: A BIPRU firm principal firm must calculate its credit risk capital requirement as the sum of: (1) the credit risk capital component; (2) the counterparty risk capital component; and (3) the concentration risk capital component., 1

2 Chapter/Rule Modification/Waiver subject to the following: (4) for exposures covered by the IRB permission (as set out in Schedule 1 of the IRB permission), the principal firm must calculate its credit risk capital requirement and (to the extent that the relevant Handbook provisions provide for the use of the IRB approach) the counterparty risk capital component and the concentration risk capital component in accordance with the IRB approach and the IRB permission; (5) the principal firm must comply with other requirements in the IRB permission; and (6) the IRB permission means direction number and a "principal firm" means the same thing as it does in that direction. BIPRU 3.1.1R BIPRU 8.8 The rule is modified by inserting after 'a BIPRU firm', the following: "but does not apply to a firm in relation to exposures to which the IRB approach is applied" The table inserted after BIPRU 8.8.1R by direction number and is modified by adding the following provisions: 2

3 Chapter/Rule Modification/Waiver "BIPRU 8.8.1AR Table: Permissions to use advanced approaches This table belongs to BIPRU 8.8.1R Advanced prudential calculation approach IRB approach [Note 2] Scope (1) Subject to (2), applies to the exposures coming within the scope of Schedule 1 of the IRB permission in relation to a firm's UK consolidation group and each non- EEA sub-group as applied on a consolidated basis. (2) Applies to the exposures of the following undertakings: See list in the Appendix. Remarks A firm must comply with the requirements of the IRB permission as applied on a consolidated basis. Note 2: The IRB permission means direction number and a "principal firm" means the same thing as it does in that direction." Conditions 4.1 This direction applies to the firms for so long as they remain part of the Standard Chartered Group. 4.2 This direction is subject to the following conditions which must be met by the firms: 1. The firms must add an appropriate conservatism to their capital resources at first use of the IRB approach and until the firms complete the move to defaultweighted average LGD and EAD, and incorporate the re-estimated impact of the downturn LGD which is to take place by 31 December The firms must add an appropriate conservatism to their capital resources at first use of the IRB approach and until they demonstrate that: (i) their approach to long-run PD is appropriate; and (ii) their application of this approach to the Consumer Bank portfolios is appropriate. The firms must complete these requirements by the 31 December The firms must present to the FSA with documentary evidence that these requirements have been met. 3

4 Guidance 5.1 The schedules to this direction in part contain requirements referred to in GENPRU R (as modified), and provisions in BIPRU, which the firm must comply with as rules. Schedule 2 sets out details of the how the IRB permission applies for the purposes of BIPRU R (1) to (6). The schedules also contain guidance for the firm and where this is the case this is indicated. 5.2 As set out in SUP 8, the firm must notify the FSA immediately if it becomes aware of any matter which could affect the continuing relevance or appropriateness of this waiver. In particular any material change to the models needs to be reported to the FSA by the firms. 5.3 Any changes to any of Schedules 1 to 2 of this direction will require a variation of this direction. 5.4 As part of the supervisory process, the FSA will from time to time reissue Schedule 5. This does not represent a variation of this direction. Instead it is a process for recording in one place cumulative changes to the matters set out in the Schedules. 5.5 BIPRU 8 has already been amended by direction numbers and to allow a firm to use an advanced prudential calculation approach for the purposes of consolidated requirements. This direction further modifies BIPRU 8 to require a firm to use the IRB approach on a consolidated basis. Interpretation 7 Interpretative provisions of the Handbook apply to this direction in the same way they apply to the Handbook. Note on disclosure The FSA has decided not to publish the full text and schedules of the waiver directions as it has been deemed inappropriate and unnecessary. In particular, to do so might prejudice, to an unreasonable degree, the commercial interests of the firm concerned. However, in the interests of transparency, the FSA's policy is to publish and abridged version of the waiver direction, as a record that the advanced prudential approach waiver has been granted. Relationship Management Team Wholesale Firms Division Financial Services Authority 4

5 Schedule 1 High level scope and coverage of IRB permission granted The FSA has granted an IRB permission for the categories of exposure identified in table 1 below (boxes containing a tick) with the exception of the permanent exemptions in table 2. Exposures that are not applicable to the firm are left blank. Table 1 IRB exposure classes* Sub-classes Advanced IRB approach Claims or contingent claims on central governments and central banks Claims or contingent claims on institutions Claims or contingent claims on corporates Retail claims or contingent retail claims Secured/ Development and investment lending on real estate Other Corporate Mortgage (Prime) Mortgage (sub prime/ non-performing/ Buy-to-let/ Others) Qualifying revolving retail exposure Retail SME Other Retail Equity claims Securitisation positions Non credit-obligation assets Geographies (by domicile of obligor) All countries UK only (Further column on a case by case basis) * This is the list of broad classes of exposures within the scope of this direction as referred to in BIPRU R. 5

6 Portfolios permanently exempted from the IRB approach for application of the standardised approach (As referred to in BIPRU R) Category Exposure class Portfolio Description Permanent exemptions for sovereigns, churches, religious communities, and institutions (As referred to in BIPRU R (1), BIPRU R (2) and BIPRU R (3)) Non-significant business units and immaterial exposure classes (As referred to in BIPRU R (1) and BIPRU R (4)) Retail Credit cards Revolving loans Instalment loans Mortgages Auto loans SME Wealth management Retail portfolio exemptions relate to various countries (mainly African or Middle Eastern) where size or nature of portfolio makes application of advanced approach difficult. Wealth management to be exempt all locations Wholesale Development organisations; Private Equity; Purchased receivables Jordan and Lebanon portfolios Wholesale exemptions relate to portfolios where size or nature of portfolio makes application of advanced approach difficult. Other (As referred to in BIPRU R (1) and BIPRU R (5)-(10)) 6

7 Schedule 2: This Schedule sets out details of the requirements in respect of how the IRB permission applies for the purposes of BIPRU R (1) to (6). The notes in this schedule are guidance only. For firms using their own estimates of LGD and conversion factors 1. The firm may take into account unfunded credit protection to reduce LGD in the following manner: Not applicable Note. If the firm uses its own estimates of LGD and conversion factors it may only take into account unfunded credit protection to reduce LGD in the manner set out in its IRB permission (see BIPRU R (3)). 2. The firm may only recognise the effects of financial collateral under BIPRU R in the following manner: Where possible, separately identify the effect of financial collateral from other LGD aspects, then make an adjustment to the exposure value that would have the same effect on the overall risk-weighted exposure amounts. Note. As set out in BIPRU R, in calculating the value of its exposures to a counterparty or to a group of connected clients the firm, within the scope of its IRB permission, the firm must satisfy the FSA that the effects of financial collateral can be separately estimated from other LGD aspects, and must be able to demonstrate the suitability of the estimates produced. (see BIPRU R (4)). For all firms with IRB permission 3. The firm must deal with equity exposures in the following manner (see BIPRU R (5) and BIPRU R): The simple risk weight approach (see BIPRU R); 4. The firm may not recognise as eligible collateral a physical item of a type other than those types indicated in BIPRU R - BIPRU R (Eligibility of real estate collateral) and if the conditions in BIPRU R are met. Note. A firm may only recognise such collateral as eligible if its IRB permission provides that the firm may treat collateral of that type as eligible and if the firm is able to demonstrate the following (see BIPRU (6) and BIPRU R): 1) the existence of liquid markets for disposal of the collateral in an expeditious and economically efficient manner; 2) the existence of well-established, publicly available market prices for the collateral; and 3) there is no evidence that the net prices it receives when collateral is realised deviates significantly from the market prices referred to in (b). 7

8 Schedule 3: Reporting Requirements This Schedule sets out reporting requirements for the firm for the purposes of GENPRU R as modified. Reporting requirements The firm must keep the FSA informed about its IRB rating systems and the environment within which they are being operated. The firm must provide information to the FSA in a manner that allows the FSA to exercise adequate oversight of the firm's IRB approach. In particular the firm is required to provide reports to the FSA in accordance with the requirements below. 1. The firm must inform the FSA in advance of significant events affecting the operation of ratings, such as: introduction of new rating systems, significant changes to rating systems, significant changes to governance or senior management arrangements, any other significant event affecting the rating systems. Any material changes to one or more of the above must be notified to the FSA as soon as practicable. Detailed information should be provided on quantitative and qualitative aspects of the change. Where changes to rating systems are involved the firm must report these changes to be reported in advance of their occurring in order to allow the FSA to review the rating system prior to live introduction. 2. In addition the firm must provide the FSA with details of any other changes relating to approved rating systems. This information may be provided after the event occurs. 8

9 Schedule 4: Roll-out Plan Exposure class Portfolio Descript ion 2008 Retail other Wholesale Brunei Instalment loans Hsinchu Bank, Taiwan all WB portfolios Planned Implementation Window Start of End of Window Window January 2008 March 2008 Dec 2008 For information: Consolidated supervisor review (or other competent authority as specified) to take place before roll-out (Tick as applicable) Wholesale 2009 Retail Mortgage Retail Mortgage Retail Mortgage Retail Mortgage Retail other Retail Retail Union Bank of Pakistan all WB portfolios HK SCB SME Mortgage Malaysia SME Mortgage Singapore SME Mortgage Hsinchu Mortgage Hsinchu Instalment Loans Permata Union Bank of Pakistan January 2008 Dec 2008 March 2009 March 2009 March 2009 June 2009 June 2009 June 2009 Sept

10 Schedule 5 (Version control) Guidance this table is used to maintain an audit trail of the evolution this direction. A new version number should be created each time a schedule to the direction is amended, whether or not the direction itself is formally revoked and reissued. Version Comment Authorisation Date 10

11 APPENDIX STANDARD CHARTERED GROUP Name 1 Advantage Limited 2 African Banking Corporation Limited 3 Alpha View Investments Limited 4 Amphissa Corporation Sdn Bhd 5 Assets Management Corporation Colombia S.A. 6 Banco Standard Chartered S.A. 7 Brightt Limited 8 BWA Dependents Limited 9 C.E.C. Finance Limited 10 Cartaban (Malaya) Nominees Sdn Bhd 11 Cartaban Nominees (Asing) Sdn Bhd 12 Cartaban Nominees (Tempatan) Sdn Bhd 13 Chartered Corporate Services Singapore Limited 14 Chartered Financial Holdings Limited 15 Chartered Insurance Services Limited 16 Clive Street Nominees Private Limited 17 Compass Estates Limited 18 Creditor Co. Limited 19 CWB Capital Partners (Investments) Limited 20 CWB Capital Partners (Nominees) Limited 21 CWB Capital Partners Limited 22 Debt Instrument Transaction SupervisorY Co. Limited 23 Exonomy Limited 24 FinVentures UK Limited 25 Horsford Nominees Limited 26 House (M) Sdn Bhd 27 IT-365 Malaysia Sdn Bhd 28 Manhattan Mortgage Company Limited 29 Memylife SDN BHD 30 Merchant Solutions Pte Ltd 31 Merlion India Fund I Limited 32 Merlion India Fund II Limited 33 Merlion India Fund lll Limited 34 Merlion India Managers Limited 35 Ming Yiu Properties Limited 36 MINT Financial and Insurance Agency Inc 37 MMI Technoventures Pte Limited 38 Moneylink Limited 39 Mortgage Asset Receivables Securitisation (1) Limited 40 New Group Investments Limited 41 Orient Delta Properties Limited 42 PF Financial Korea Limited 43 Price Solutions Pakistan (Private) Limited 44 Price Solutions Philippines Inc 45 Price Solutions SDN BHD 46 Price Solutions Singapore Pte Ltd 47 Prime Financial Holdings Limited 48 Prime Financial Limited 49 Prime Financial Services (Shenzhen) Limited 50 PrimeCredit (Asia) Limited 51 PrimeCredit Gerent Guarantee Limited 52 PrimeCredit Limited 53 PT Bank Permata Tbk 54 PT Standard Chartered Securities Indonesia 11

12 Name 55 PT. Price Solutions Indonesia 56 Raffles Nominees (Pte) Limited 57 SC Learning Limited 58 SC Learning Pte Limited 59 SC2 Investments (Singapore) Private Limited 60 SCB Nominees (CI) Limited 61 SCB Securities Limited 62 SCBAL Limited 63 SCL Consulting (Shanghai) Co. Ltd 64 SCMB Overseas Limited 65 Scope International (China) Co. Limited 66 Scope International (M) Sdn Bhd 67 Scope International Private Limited 68 Seychelles International Mercantile Banking Corporation Limited. 69 Smart Application Investment BV 70 Sociedad Fiduciaria Extebandes S.A. 71 Special Asset Reconstruction Company Private Limited 72 St Helen's Nominees India Private Limited 73 St. Helens Nominees Limited 74 Stanchart Forex Bureau Limited 75 Stanchart Forex Bureau Limited 76 Stanchart Leasing Limited 77 Stanchart Nominees Limited 78 Standard Chartered (1996) Limited 79 Standard Chartered (2000) Limited 80 Standard Chartered (CT) PLC 81 Standard Chartered (GCT) Limited 82 Standard Chartered (Jersey) Holdings Limited 83 Standard Chartered (Jersey) Limited 84 Standard Chartered (SFD No.1) Limited 85 Standard Chartered (SFD No.2) Limited 86 Standard Chartered (Thailand) Company Limited 87 Standard Chartered Africa PLC 88 Standard Chartered APR Limited 89 Standard Chartered Asia Limited 90 Standard Chartered Asset Management Limited 91 Standard Chartered Bank 92 Standard Chartered Bank (Bahamas) Limited 93 Standard Chartered Bank (China) Limited 94 Standard Chartered Bank (Hong Kong) Limited 95 Standard Chartered Bank (Mauritius ) Limited 96 Standard Chartered Bank (Pakistan) Limited 97 Standard Chartered Bank (Taiwan) Limited 98 Standard Chartered Bank (Thai) Public Company Limited 99 Standard Chartered Bank Botswana Insurance Agency (Pty) Limited 100 Standard Chartered Bank Botswana Investment Services (Pty) Limited 101 Standard Chartered Bank Botswana Limited 102 Standard Chartered Bank Cameroon SA 103 Standard Chartered Bank Cote d' Ivoire SA 104 Standard Chartered Bank Gambia Limited 105 Standard Chartered Bank Ghana Limited 106 Standard Chartered Bank Kenya Limited 107 Standard Chartered Bank Latin America B.V. 108 Standard Chartered Bank Malaysia Berhad 109 Standard Chartered Bank Nepal Limited 12

13 Name 110 Standard Chartered Bank Nigeria Limited 111 Standard Chartered Bank Nominees (Jersey) Limited 112 Standard Chartered Bank Representacao Limitada 113 Standard Chartered Bank SAL 114 Standard Chartered Bank Sierra Leone Limited 115 Standard Chartered Bank Tanzania Limited 116 Standard Chartered Bank Trustees & Executor Company (India) Private Limited 117 Standard Chartered Bank Uganda Limited 118 Standard Chartered Bank Zambia Plc 119 Standard Chartered Bank Zimbabwe Limited 120 Standard Chartered Business Consultancy (Shenzhen) Limited 121 Standard Chartered Capital (Jersey) Limited 122 Standard Chartered Capital Investments LLC 123 Standard Chartered Capital Management LLC 124 Standard Chartered Capital Markets Limited 125 Standard Chartered Corporate Advisory (Beijing) Co. Ltd 126 Standard Chartered Debt Trading Limited 127 Standard Chartered Equitor Global Asset Management Limited 128 Standard Chartered Equitor Group Limited 129 Standard Chartered Equitor Limited 130 Standard Chartered Export Finance Limited 131 Standard Chartered Finance (Brunei) Bhd 132 Standard Chartered Finance (Jersey) Limited 133 Standard Chartered Finance BV 134 Standard Chartered Finance Limited 135 Standard Chartered Finance Uganda Limited 136 Standard Chartered Financial Investments Limited 137 Standard Chartered Financial Services Limited 138 Standard Chartered First Bank Korea Limited 139 Standard Chartered Forex Corporation 140 Standard Chartered Funding (Jersey) Limited 141 Standard Chartered FURBS Trustee Limited 142 Standard Chartered Global Liquidity Funds plc 143 Standard Chartered Grindlays Limited 144 Standard Chartered Grindlays Management Company (Guernsey) Limited 145 Standard Chartered Holding (Thailand) Company Limited 146 Standard Chartered Holdings (Africa) BV 147 Standard Chartered Holdings (Asia Pacific) B.V. 148 Standard Chartered Holdings (International) BV 149 Standard Chartered Holdings Inc. 150 Standard Chartered Holdings Limited 151 Standard Chartered Insurance Broker Company Limited 152 Standard Chartered Insurance Limited 153 Standard Chartered International Trade Products Limited 154 Standard Chartered Investment Services Limited 155 Standard Chartered Investment Services Limited 156 Standard Chartered Investment Services Limited 157 Standard Chartered Investments (Singapore) Private Limited 158 Standard Chartered Investments and Loans (India) Limited 159 Standard Chartered Investments Limited 160 Standard Chartered Investments Pty Limited 161 Standard Chartered Kenya Nominees Limited 162 Standard Chartered Lease Trustee Limited 163 Standard Chartered Leasing (UK) 2 Limited 13

14 Name 164 Standard Chartered Leasing (UK) 3 Limited 165 Standard Chartered Leasing (UK) Limited 166 Standard Chartered Links (HK) Limited 167 Standard Chartered Management Services Limited 168 Standard Chartered MB Holdings BV 169 Standard Chartered Metropolitan Holdings SAL 170 Standard Chartered Modaraba 171 Standard Chartered Mortgage Finance Limited 172 Standard Chartered NEA Limited 173 Standard Chartered Nominees (Western Samoa) Limited 174 Standard Chartered Nominees Limited 175 Standard Chartered Nominees Zimbabwe Limited 176 Standard Chartered Offshore Limited 177 Standard Chartered Overseas Holdings Limited 178 Standard Chartered Overseas Investment Inc. 179 Standard Chartered PLC 180 Standard Chartered Portfolio Trading (UK) Limited 181 Standard Chartered Private Equity (Mauritius) II Limited 182 Standard Chartered Private Equity (Mauritius) Limited 183 Standard Chartered Private Equity (Mauritius) lll Limited 184 Standard Chartered Private Equity Advisory (India) Private Limited 185 Standard Chartered Private Equity Limited 186 Standard Chartered Receivables (UK) Limited 187 Standard Chartered Securities Investment Consulting Company Limited 188 Standard Chartered Services of Pakistan (Private) Limited 189 Standard Chartered Share Trustees Limited 190 Standard Chartered Sherwood (HK) Limited 191 Standard Chartered Sierra Leone Dependents Limited 192 Standard Chartered Strategic Brand Management Limited 193 Standard Chartered Trade Services Corporation 194 Standard Chartered Trade Support (HK) Limited 195 Standard Chartered Trustees (UK) Limited 196 Standard Chartered UK Holdings Limited 197 Standard Chartered UTI Securities Private Limited 198 Standard Chartered Zambia Nominees Limited 199 Thai Exclusive Leasing Company Limited 200 The Bellamy Partnership 201 The Blaine Partnership 202 The C.B.I. Development Corporation Limited 203 The Romaldo Partnership 204 Treasureland Worldwide Limited 205 Union Bank Limited 206 Union Leasing Limited 207 Westwood Limited 14