Joint Forum consults on credit risk management: The Joint Forum is consulting on recommendations for credit risk management across sectors. In compiling the report it surveyed supervisors and firms across the global banking, securities and insurance sectors. The survey was designed to enable it to gain an insight into the current state of risk management in light of the significant market and regulatory changes since 2008. It received responses from 15 supervisors and 23 firms from Europe, Asia and North America. Having analysed the responses to the survey, and conducted discussions with some firms, the Joint Forum has set out the following recommendations:

  • supervisors should be cautious against over-reliance on internal models for credit risk management and regulatory capital;
  • with the current low interest rate environment possibly generating a "search for yield" through a variety of mechanisms, supervisors should be aware of the growth of such risk-taking behaviours and the resulting need for firms to have appropriate risk management processes;
  • supervisors should be aware of the growing need for high-quality liquid collateral to meet margin requirements for OTC derivatives sectors, and if any issues arise in this regard they should respond appropriately; and
  • supervisors should consider whether firms are accurately capturing central counterparty exposures as part of their credit risk management.

The consultation closes on 4 March. (Source: Credit Risk Management Across Sectors)