Regulatory Alerts2026-01-09
SR 21-19: Federal Reserve Reminds Firms of Safe and Sound Practices for Counterparty Credit Risk Management
The Federal Reserve issued this guidance to remind banking organizations with large derivatives portfolios and investment fund relationships of safe and sound counterparty credit risk management practices following the Archegos Capital Management default. The letter requires firms to conduct rigorous due diligence by obtaining complete and verified information on fund strategies and concentrations, while ensuring robust risk management governance and appropriate margin terms that reflect evolving risk profiles. Institutions failing to maintain adequate transparency, effective oversight, or risk-sensitive contractual terms may be engaging in practices inconsistent with safe and sound banking standards.
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