Credit risk mitigation

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Credit risk mitigation is a concept of great interest to those concerned with the capital position of financial institutions. Things like the leverage ratio and its fabled denominator, as percolated by that splendid assembly of prudent Schweizers, the Basel Committee on Banking Supervision.

Credit risk mitigation techniques

Banks may use credit risk mitigation techniques (jauntily known as “CRM techniques” or even “tools”) to reduce the impact on their capital calculations of counterparty credit exposure in their trading businesses.


Bedtime reading


References

Regulatory Capital Anatomy™
The JC’s untutored thoughts on how bank capital works.

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