Prudential rules

While carrying on its business, a bank is required to abide by certain prudential rules aimed at limiting the risks of banking business so as to ensure that depositors´ deposits are not put in danger and the banking sector as a whole is not destabilised. The basic prudential rules are based on the recommendations of the Basle Committee on Banking Supervision at the Bank for International Settlements (BIS and on EC directives.

The basic prudential rules are laid down directly in the Act on Banks, e.g. the requirement to have an adequate governance, the requirement to maintain capital adequacy, limits on the bank´s qualifying holdings in other entities, a prohibition of preferential trading with persons having close personal and proprietary links with the bank ("persons having a special relation to the bank"), and the requirement for "Chinese walls" between the bank´s lending and investment transactions. These rules are further specified in a series of CNB provisions and decrees.