Basel Committee set to shift on counterparty credit exposures

The Basel Committee on Banking Supervision is likely to bow to pressure from the banking industry and change the way it deals with counterparty credit risk.

“There is a huge amount of support to use expected positive expense [models],” Paul Sharma, head of the Financial Services Authority’s prudential, risk and accounting department, told delegates attending an International Swaps and Derivatives Association conference in Barcelona today.

Sharma said the current expected future expense model was “inadequate”. However, he warned that certain “methological problems” with the expected positive expense approach to measuring counterparty credit risk

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