Banks Are Not Ready for Counterparty Risk Elements of Basel lll

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Enhancing Counterparty Credit Risk management practices is a key focus for banks. This is in response to changes in accounting rules and new prudential and market regulations, which have tightened substantially following the financial crisis. Collectively, these changes are having a deep impact on the market and the way banks price and manage the risk associated with derivatives. 

Quanitifi, Ernst & Young and PRMIA, recently hosted a joint seminar in London on 'Managing counterparty risk & Basel III'. Over 120 senior traders and chief risk officers from leading global and regional banks who attended the seminar were surveyed to gain an insight into the approaches taken towards Counterparty Credit Risk and Basel III.

Key Findings

  • The majority of banks have Basel III projects in progress (71%) but non are completed
  • Banks continue to trend of creating centralized counterparty risk management groups (CVA desk) to more actively monitor and hedge credit risk (50%), A significant number of banks, however, continue to manage across multiple groups (38%)
  • data management (46%), analytics (16%), and performance and scalability (16%) are considered the most important component of an effective counterparty risk solution. This is consistent with earlier surveys in 2011 and 2013 by Quantifi.



Recommended Whitepapers and Articles

Measurement and Management of Counterparty Risk

Optimising Capital Requirements for Counterparty Credit Risk

How the Credit Crisis Has Changed Counterparty Risk Management

Challenges in Implementing a Counterparty Risk Management Process


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