The Basel Committee on Banking Supervision (BCBS) has released a draft for public consultation on new guidelines aimed at improving counterparty credit risk management for banks. The consultation period is open until August 28, 2024.
The proposed guidelines emphasize comprehensive due diligence, the development of robust credit risk mitigation strategies, and the use of diverse metrics to measure and control counterparty risk. They also call for strong governance frameworks to support effective risk management practices.
The BCBS highlights the importance of these guidelines in addressing long-standing weaknesses in counterparty credit risk management, particularly for banks with high-risk exposures to non-bank financial intermediaries. The guidelines encourage a risk-based, proportional approach to implementation.
Banks and supervisory authorities are encouraged to use these guidelines to enhance their current practices and address potential gaps in their counterparty credit risk management frameworks. The BCBS aims to ensure that banks can manage their credit risk exposures effectively, especially during times of financial stress.
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