How to implement counterparty credit risk requirements under Basel III: The challenges
Abstract
To manage counterparty credit risk (CCR), it is fundamental to have in place models that efficiently measure the firm future CCR exposures as a function of the relevant underlying market factors. Basel II has revealed numerous loopholes in accurately managing CCR during the financial crisis. As a result, Basel III addresses several shortcomings and ambiguities present in the previous capital accord such as enhancing capital for counterparty default risks inherent in structured financing transactions and over the counter (OTC) contracts and/or securitisation transactions. Banking regulation is no longer a secondary concern but is now a primary trigger in determining strategic direction and long term positioning of the bank. This time, choosing ‘the minimum compliance’ option for implementing the new CCR requirements, will not be enough to sustain an optimal risk-management structure nor a long-term business growth. Only the implementation of a sound riskmanagement structure can enable any banks to get to that highly developed stage.
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Author's Biography
Diana Ouamar is a co-founder and director of RIMA focusing on regulatory risk for financial institutions. Diana supports the interpretation and analysis of existing regulations, alongside other experts focusing on risk, including: market risk, credit risk and regulatory capital. She discusses regulatory issues and challenges facing banks, regulators and other market participants. Diana organises and participates in ‘master classes’ to share knowledge; she gives presentations to clients, runs workshops and gives media interviews. She has been quoted in the Financial Times of London, Wall Street Journal, Complinet, Thomson Reuters, Financial Risk Today, FX Magazine and other industry publications. Diana began her career at Calyon Investment Bank in Paris and Fitch Ratings Agency in London as a corporate credit analyst. She developed her risk practice at Moody’s Investors Services in London as a senior associate within the risk-management team for financial institutions and then at Rule Financial as a regulatory risk consultant. Diana holds an MSc in finance from the University of London and a master’s in economics from the Pantheon Sorbonne, University of Paris.
Citation
Ouamar, Diana (2013, July 1). How to implement counterparty credit risk requirements under Basel III: The challenges. In the Journal of Risk Management in Financial Institutions, Volume 6, Issue 3. https://doi.org/10.69554/TBTD2393.
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