Management of CCR — Policies, processes and systems
An institution shall establish and maintain a CCR management framework, consisting of:
policies, processes and systems to ensure the identification, measurement, management, approval and internal reporting of CCR;
procedures for ensuring that those policies, processes and systems are complied with.
Those policies, processes and systems shall be conceptually sound, implemented with integrity and documented. The documentation shall include an explanation of the empirical techniques used to measure CCR.
The CCR management framework required by paragraph 1 shall take account of market, liquidity, and legal and operational risks that are associated with CCR. In particular, the framework shall ensure that the institution complies with the following principles:
it does not undertake business with a counterparty without assessing its creditworthiness;
it takes due account of settlement and pre-settlement credit risk;
it manages such risks as comprehensively as practicable at the counterparty level by aggregating CCR exposures with other credit exposures and at the firm-wide level.
An institution using the IMM shall ensure that its CCR management framework accounts to the satisfaction of the competent authority for the liquidity risks of all of the following:
potential incoming margin calls in the context of exchanges of variation margin or other margin types, such as initial or independent margin, under adverse market shocks;
potential incoming calls for the return of excess collateral posted by counterparties;
calls resulting from a potential downgrade of its own external credit quality assessment.
An institution shall ensure that the nature and horizon of collateral re-use is consistent with its liquidity needs and does not jeopardise its ability to post or return collateral in a timely manner.