Introduction

In December 2024, the BCBS issued guidelines to emphasise certain fundamental practices in counterparty credit risk (CCR) remain inadequate. They followed the Archegos Capital collapse, bouts of market volatility due to geopolitical uncertainties and the 2022-23 gilt market disruption.

The guidelines intend to address weaknesses across multiple areas, such as due diligence, risk mitigation and measurement practices, and stress testing.

They are applicable to all banks, and more so for those having non-banking financial institutions (NBFIs), including highly leveraged ones, as counterparties.

The guidelines ask banks to tailor risk management applications based on their counterparty profiles and risk complexity as well as focus on dynamic monitoring, pinned to a risk-based approach.