The Basel Committee on Banking Supervision (BCBS) has published a consultation document outlining new guidelines for counterparty credit risk (CCR) management.
These proposed guidelines aim to address long-standing industry weaknesses in managing CCR and will replace the Committee’s previous guidance issued in 1999.
“The new guidelines focus on key practices critical to effective CCR management,” stated a BCBS spokesperson. “These practices include conducting comprehensive due diligence on counterparties, developing robust credit risk mitigation strategies, employing a variety of metrics for measuring and controlling risk, and building a strong governance framework.”
The BCBS emphasizes the guidelines’ response to recent industry shortcomings in CCR management, particularly regarding non-bank financial intermediary (NBFI) distress. While broadly applicable to all counterparty types, the guidelines target high-risk exposures, including those associated with NBFIs.
The Committee encourages banks and supervisors to implement the guidelines in a risk-based and proportional manner, considering the complexity and risk profile of their counterparty exposures and business activities.
