Banks' Interactions with Highly Leveraged Institutions.
This report serves three primary objectives:
- Evaluating the potential risks resulting from the activities of HLIs, with particular regard to their interactions with banks.
- Assessing the deficiencies in banks' risk management practices in respect of HLIs.
- Evaluating alternative policy responses for addressing these risks, including the encouragement of sound practice on the part of banks.
While it is virtually impossible to provide a precise definition of an HLI, for the purpose of this paper the focus will be on large financial institutions that have the following characteristics: (a) they are subject to little or no direct regulatory oversight, as a significant proportion operate through offshore financial centres; (b) they are subject to limited disclosure requirements; and (c) they take on significant leverage. The Committee recognises that not all so-called hedge funds have these characteristics while many mainstream financial institutions exhibit some of them. As such, the recommendations of the report refer to banks' dealings with institutions that pose the particular counterparty risks arising from such characteristics, however they may be classified.
- Publication Date: January 1999
- Publication Type: Other
- Publication Status: Superseded
- Publication Category: Credit Risk
- Number of Pages: 32
- Keywords: Credit Risk
For definitive information on regulatory matters always consult primary sources, especially where it concerns legally binding rules and regulations.
The above regulatory document abstract is quoted verbatim in this Open Risk Manual entry and provided free of charge for the convenience of all internet users. There is no explicit or implicit endorsement of this web service by the Bank of International Settlements. The copyright of the included material rests with the original authors (Links to the original texts are duly provided).