A group of federal agencies, including the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision issued new guidance on counterparty credit risk (CCR) management to address the weaknesses observed in CCR management at many banking organizations during the financial crisis.
The primary intent of the guidance is to revamp shortcomings in the timeliness and accuracy of exposure aggregation capabilities and the inadequate measurement of correlation risks in the industry. As noted by the agencies, the previous crisis has highlighted deficiencies in the ability of banking organizations to monitor and manage counterparty exposure limits and concentration risks, citing poor selection of risk metrics and inadequate system infrastructure.
