Circular
Basel Committee on Banking Supervision - Four Papers on Credit Risk
August 10, 1999
Circular No. 11174

To All State Member Banks, Bank Holding Companies, and Branches
and Agencies of Foreign Banks, in the Second Federal Reserve District:

The following is from a statement by the Board of Governors of the Federal Reserve System:

The Basel Committee on Banking Supervision has issued four papers providing guidance to banks and banking supervisors on various aspects of credit risk in banking. These papers form part of an ongoing effort by the Committee to strengthen procedures for risk management in banks. They can be obtained from the BIS web site.

The four papers are:

Sound Practices for Loan Accounting and Disclosure is final. The paper addresses issues facing banks and bank supervisors in accounting for loans and loan losses. It is a revised version of a consultative paper issued in October 1998.

The Basel Committee invites comments, by November 30, 1999, on the other three papers from all interested parties including bankers, rating agencies, analysts, industry groups, standard-setters and supervisors.

They may be submitted to the Committee's web site or mailed to:

Basel Committee on Banking Supervision
Attention: Mr. William Coen
Bank for International Setlements
CH-4002 Basel, Switzerland

Principles for the Management of Credit Risk encourages banking supervisors globally to promote sound practices for managing credit risk. The paper identifies sound practices that banks should use in managing the credit risk in all of their activities, both banking and trading.

Best Practices for Credit Risk Disclosure identifies the credit risk information that market participants and supervisors need to make a meaningful assessment of banking organizations. It encourages such institutions in all countries to provide that information to the public.

Supervisory Guidance for Managing Settlement Risk in Foreign Exchange Transactions is being issued as part of the credit package because settlement risk clearly has a credit risk dimension. The guidance builds on previous work by the Committee on Payments and Settlements Systems of the Bank for International Settlements.

The Basel Committee was established by the central bank Governors of the Group of Ten countries in 1975 and operates under the auspices of the Bank for International Settlements in Basel, Switzerland. The Committee consists of senior supervisory authorities representing the world's largest banking systems and works to strengthen bank supervisory and regulatory practices worldwide.

Questions on this matter may be directed, at this Bank, to Stefan Walter, Assistant Vice President, Advisory and Technical Services Function, Bank Supervision.