Regulatory Alerts1999-03-09
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Sound Practices for Banks’ Interactions with Highly Leveraged Institutions
The Basle Committee on Banking Supervision issued this document to establish sound practices for managing counterparty credit risk arising from banks' interactions with highly leveraged institutions. It requires banks to implement robust credit risk strategies, conduct thorough due diligence, and utilize accurate exposure measurement methodologies including potential future exposure and stress testing. The guidelines further mandate effective limit setting, appropriate use of collateral, and ongoing monitoring to ensure financial stability and mitigate systemic risks associated with HLI defaults.
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