Counterparty Credit Risk (CCR) Management under BASEL III Accord: An Overview

Abstract

Banks in the process of financial intermediation are confronted with various types of financial and non-financial risks and Counterparty Credit Risk or CCR is one of the crucial financial risks. Aptitude to estimate the CCR and take appropriate position will be the key to success. The financial sector especially the banking industry in most emerging economies is passing through a process of change in the world today including India. Rising global competition, increasing deregulation, introduction of innovative products and delivery channels have pushed CCR management to the forefront of today's financial landscape. Effective CCR management is critical for any banking institution for achieving financial soundness. In view of this, aligning CCR management to bank's organisational structure and business strategy has become integral in banking business. This paper attempts to discuss in depth, the importance of CCR management process and make a comparative analysis between Basel II and Basel III accord on the same issue in the context of Indian Banking sector.