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Counterparty credit risk reporting. 108. Banks should embrace the risk reporting practices stated in Principles for effective risk data aggregation and risk reporting16 with respect to their CCR reporting. All principles below should be seen as enhancing these generally formulated risk reporting practices.
Oct 27, 2023 · Strengthening management of counterparty credit risk (CCR) remains a top priority for bank chief risk officers and heads of global markets. This broad consensus reflects the potential for significant losses from CCR exposures, as well as the prevalence and complexity of highly leveraged strategies and the need for thoughtful risk oversight in light of heavy capital requirements.
Banks should be able to measure CCR exposure at various levels of granularity, such as by business line, geographic region, industry, and on a consolidated basis. Aggregation should be timely and include all trades. CCR Concentrations Banks should use quantitative and qualitative means to identify concentrations and
- Risk Coverage
- Capital Charges For CVA Risk
- Capital Charges For Default Risk
The risk-based capital charges for CCR in Basel III cover two important characteristics of CCR: the risk of counterparty default and a credit valuation adjustment (CVA). The risk of counterparty default was already covered in Basel I and Basel II. The Basel III reforms introduced a new capital charge for the risk of loss due to the deterioration in...
The CVA risk capital requirement is calculated for a bank's total CVA portfolio on a standalone basis. This calculation takes into account risk-reducing effects, such as netting, collateral arrangements and certain offsetting hedges. The BCBS incentivises active risk management as hedging by recognising external and bank internal hedges. There are ...
Estimating the exposure amount is critical for calculating the capital requirements for CCR. The exposure amount for a particular netting set multiplied by the risk weight, using either the SA or the internal ratings-based (IRB) approach for credit risk, is the risk-weighted asset in the CCR default risk calculation. There are two non-modelled appr...
CCR is a multidimensional form of risk, affected by the exposure to and credit quality of the counterparty, both of which are sensitive to market-induced changes. It is also affected by the interaction of these risks, for example the correlation between an exposure and the credit spread of the counterparty, or the correlation of exposures among the banking organization’s counterparties.
Dec 15, 2019 · Counterparty credit risk (CCR) is the risk that the counterparty to a transaction could default before the final settlement of the transaction's cash flows. An economic loss would occur if the transactions or portfolio of transactions with the counterparty has a positive economic value at the time of default. Unlike a firm's exposure to credit ...
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SA-CCR. The Standardized Approach for counterparty credit risk (in short, SA-CCR) is a new approach for calculating the exposure amount of derivative contracts under the regulatory capital rule of the FDIC, the Board of Governors of the Federal Reserve System, and the Office of the Comptroller of the Currency.
