The Basel Committee has issued a consultative document on sound practices for backtesting counterparty credit risk models. This supervisory guidance reinforces and explains some of the proposed changes to the Basel II framework included in the consultative document, "Strengthening the Resilience of the Banking Sector", which was issued in December 2009. The paper provides additional information on supervisory expectations as well as recommendations to strengthen the backtesting of internal assessments of counterparty credit risk exposures. Banks that have received supervisory permission to use internal model methods to calculate regulatory capital must validate their models on an on-going basis. Backtesting is a key part of the model validation process and the financial crisis has revealed that additional guidance in this area is needed. The Committee believes that implementation of these sound practices will improve the backtesting of banks' models and, as a result, will enhance the resilience of individual banks in the financial system. Comments are invited by 31May 2010.