Adam Scott Actor

The federal bank regulatory agencies today issued guidance to help ensure that banking organizations effective practice of counterparty credit risk (CCR) management. The guide, published by the Federal Reserve, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and the Office of Thrift Supervision, is based on existing supervisory guidance and describes effective practices for CCR management industry . CCR is the risk that the counterparty to a transaction of default or deterioration in the creditworthiness before the final settlement of the transaction.

The guide is intended primarily for use by banks with large portfolios of derivatives, as well as for supervisors to assess and review the management of these entities CCR. The guide emphasizes that banks must use information systems relevant parameters and limits of exposure, well developed and complete stress test, and maintain systems to facilitate the measurement and aggregation of CRC through the organization. The guidance also includes best practices for risk control functions, including but not limited to, validation of models and systems, ensuring an independent risk management and internal audit processes and management of legal and operational risks.