The Reserve Bank of New Zealand has done away with the exemption that locally incorporated banks had on connected exposure limits when the exposure is based on a guarantee from a AAA-rated parent.The only locally incorporated bank to be affected by this will be Rabobank New Zealand, which is not subject to a limit on exposures to connected persons because of the guarantee from Rabobank Nederland.The total credit exposure of a banking group to all connected persons is limited by a percentage that is dependent on the credit rating of the bank. The maximum limit is 75 per cent for a bank with a rating of AA/Aa2 and above. However, no such limits applied to banks that had guarantees from a AAA-rated parent.The removal of the exemption means that such exposures will now have to be risk weighted by the risk weights applicable to the counterparties to the exposures rather than according to the risk weight assigned to the guarantor. This means the bank will be required to hold more capital for the same level of exposures.As of 31 March, Rabobank's exposure to connected persons totalled NZ$379.4 million, which was 149.8 per cent of the banking group's tier one capital. Such exposure doubled from just 72 per cent a year earlier.The new norms will be applicable from September 30.