What is Credit Risk Management
 |
Author: Mat Newman, head of product management, Adaptiv, SunGard's capital markets business Recently, four U.S. federal agencies ? Office of the.
What is Credit Risk Management
Capital Markets Insights INTERAGENCY GUIDELINES ON COUNTERPARTY CREDIT RISK MANAGEMENT ? A GOOD START, BUT MORE TO DOPosted: August 17, 2011, 10:
Recently, four U.S. federal agencies ? Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and Office of Thrift Supervision ? published a paper on interagency supervisory guidance for counterparty credit risk (CCR) management. The paper covers a number of wide-ranging topics from sound corporate governance for managing CCR, through to methodology choices in computing credit metrics.
The thrust of the argument is that CCR risk management should be a holistic exercise, and not a collection of risk islands. This is reflected in the recommendation to aggregate exposures from across the firm ? across geographies, asset classes, and business lines. It is also reflected in the assertion that one credit measure does not fit all occasions, and that firms should run a multitude of different measurement approaches to get the full picture of their risk profile. These are all sound recommendations, and achieving them would certainly improve the average level of CCR management in today?s banking world.
One area where I feel the paper doesn?t go far enough is on the speed of data aggregation. The report mildly suggests that senior management should review reports ??with data that are no more than three weeks old.? As we have seen, three weeks is a long time in the credit markets! Even the recommendation that ?counterparty-level current exposure and potential exposure should be calculated daily? seems to recommend what best practice was five years ago. Surely we are now able to aggregate credit exposures in real-time, as deals are done. This is critical for truly keeping control of counterparty credit risk in today?s fast-moving environment.
What is your impression of the counterparty credit risk management framework outlined in the U.S. interagency guidelines? How long is too long to wait for risk data?
Aite Group buy-side Capitalize on Change capital markets capital markets CFTC Cliq counterparty exposure counterparty risk data aggregation Data Management Derivatives derivatives processing Dodd-Frank Efficiency enterprise risk management FIA Expo financial reform financial regulation financial regulations innovation leadership listed derivatives managing risk MiFID Networks New York City Day operational risk OTC OTC derivatives regulation Risk risk management sell-side Stephen Bruel SunGard SunGard City Day SunGard City Days SunGard Stream systemic risk ten10 Tony Scianna TowerGroup Transparency twitterview© SunGard 2002?2009Privacy Policy Terms of Use SunGard.