Validation – Counterparty Credit Risk
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Case Study
Validation – Counterparty Credit Risk
A wholly owned subsidiary of a Singapore-based bank operating in India, focused on retail and wholesale banking and derivatives
The business situation
- The bank required independent assurance over its counterparty credit risk (CCR) framework in line with the Reserve Bank of India (RBI) requirements, including adoption of the Current Exposure Method (CEM), accuracy of Replacement Cost (RC) /Potential Future Exposure (PFE) calculations, robustness of collateral management, limit monitoring, and disclosures
Our team’s role
Policy and Framework Review
Review of CCR and collateral management policies for RBI alignment
Model Validation
Validation of RC, PFE, CVA, and collateral adjustments for derivative portfolios
Limit Monitoring Assessment
Review of counterparty limit utilization, breach escalation, and margin call processes
Disclosure Assessment
Evaluation of quantitative and qualitative CCR disclosures and governance practices
The value our team added
- Strengthened regulatory alignment and preparedness for supervisory review
- Increased accuracy of CCR measurement by identifying calculation errors in RC/PFE and recommending corrections.
- Reduced counterparty risk by highlighting breaches in limit monitoring and improving escalation mechanisms.
- Improved CCR disclosures by refining policies, highlighting control gaps, and aligning practices with RBI requirements.
Enhance Counterparty Risk Confidence
From CCR validation to disclosure and regulatory readiness
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