Basel Committee publishes final guidelines for counterparty credit risk management

The guidelines will replace the Committee's "Sound practices for banks' interactions with highly leveraged institutions" published in January 1999. The guidelines include key practices critical to resolving long-standing industry weaknesses in CCR management, including the need to: (i) conduct comprehensive due diligence of counterparties both at initial onboarding and on an ongoing basis; (ii) develop a comprehensive credit risk mitigation strategy to effectively manage counterparty exposures; (iii) measure, control and limit CCR using a wide variety of complementary metrics; and (iv) build a strong CCR governance framework. The guidelines provide a supervisory response to the significant shortcomings that have been identified in banks' management of CCR, including the lessons learned from recent episodes of non-bank financial intermediary (NBFI) distress.

The guidelines benefited from comments from a range of stakeholders as part of the public consultation in April 2024. The guidelines are designed to be broadly applicable to manage banks' CCR exposures to all types of counterparties. However, the greatest potential benefits are expected to be in cases where banks have high-risk exposures to counterparties, including NBFIs. Banks and supervisors are encouraged to take a risk-based and proportional approach in the application of the guidelines, taking into account the degree of CCR generated by banks' lines of business, their trading and financing activities and the complexity of such CCR exposures.

The Committee encourages full adoption of its guidelines by members, particularly for their internationally active banks, as soon as possible. It will continue to monitor implementation of the counterparty credit risk management guidelines on an ongoing basis.