COUNTRY LIMIT

The aggregate limit that a bank places on all borrowers in a given foreign country. Country limits typically apply to all borrowers, regardless of whether they are public or private, individual or institutional. The creditworthiness of the borrower and the unit of currency involved are also irrelevant for the purposes of this restriction.

Country limits are set by banks as a means of limiting their lending risk. Similar to diversifying a stock portfolio, banks use country limits to diversify their loan portfolios and lower risk. Political unrest in a foreign country may result in loan default, regardless of the stability of the borrower. Therefore, many different criteria must be assessed when setting this limit.