On 13 Dec 2024, the HKMA announced the BCBS's updated Guidelines for counterparty credit risk management, replacing its 1999 paper, which establish four key practices for CCR management. The HKMA will revise its CR-G-13 module to align with these guidelines, while urging Authorized Institutions to proactively review their CCR frameworks against the new standards.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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Introduction
On 13 Dec 2024, the Hong Kong Monetary Authority (HKMA) issued a circular informing Authorized Institutions of the Basel Committee on Banking Supervision's (BCBS) publication of updated Guidelines for counterparty credit risk management, effective 11 Dec 2024, which replace the BCBS 1999 paper on highly leveraged institutions.
Key Practices from BCBS Guidelines
The BCBS guidelines introduce four critical practices for counterparty credit risk (CCR) management: (i) comprehensive due diligence of counterparties at onboarding and ongoing basis; (ii) development of a holistic credit risk mitigation strategy; (iii) implementation of diverse complementary metrics for measuring, controlling, and limiting CCR; and (iv) establishment of a robust CCR governance framework to address longstanding industry weaknesses.
HKMA's Implementation Plan
The HKMA will update its existing Supervisory Policy Manual module CR-G-13 'Counterparty Credit Risk Management' in due course to reflect the BCBS guidelines. Until the update is implemented, Authorized Institutions are encouraged to review their CCR management policies and procedures against the guidelines and address any material gaps identified.
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