Under the regulatory framework, an institution's exposure to a client, or a group of connected clients, qualifies as a large exposure when it meets or exceeds 10% of the institution's Tier 1 capital. This definition underscores the importance of robust risk management practices to mitigate potential financial instability arising from significant concentrations of credit risk.

Financial institutions must ensure compliance with this guideline to foster a stable financial environment. Adequate monitoring and reporting mechanisms should be established to appropriately capture and manage these exposures, thereby safeguarding the institution's capital base and promoting sound banking practices.