Duties of Supervisors and Regulators

Supervisors should clearly communicate their expectations regarding prudent management of counterparty credit exposures, which is necessary because of the rising use of complex instruments and leveraged counterparties. International policy collaboration and coordination are essential because key creditors and counterparties to pools are organized in various jurisdictions. Supervisors should:

• Include in their expectations changes from developments in financial markets concerning best practices for counterparty credit risk management and monitor such developments to revise their policies in a timely manner.

• Actively monitor and assess whether policies and procedures measure up to regulatory guidance and industry efforts to identify best practices.

• Use both formal and informal channels of coordination and cooperation across financial industry sectors and international borders when carrying out their responsibilities with respect to exposures to private pools and leveraged counterparties both domestic and abroad.

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