Basel Committee publishes final guidelines for counterparty credit risk management

Press release  | 
11 December 2024

  • The Basel Committee has published final guidelines for counterparty credit risk management.

  • The guidelines include key practices critical to resolving long-standing industry weaknesses in counterparty credit risk management.

  • The Committee will monitor implementation of the guidelines on an ongoing basis.

The Basel Committee on Banking Supervision today issued final guidelines for counterparty credit risk (CCR) 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.

Note to editors

The Basel Committee is the primary global standard setter for the prudential regulation of banks and provides a forum for cooperation on banking supervisory matters. Its mandate is to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability. The Committee reports to the Group of Central Bank Governors and Heads of Supervision and seeks its endorsement for major decisions. The Committee has no formal supranational authority, and its decisions have no legal force. Rather, the Committee relies on its members' commitments to achieve its mandate. The Group of Central Bank Governors and Heads of Supervision is chaired by Tiff Macklem, Governor of the Bank of Canada. The Basel Committee is chaired by Erik Thedéen, Governor of Sveriges Riksbank.

More information about the Basel Committee is available here.