Credit Risk Mitigation

From Open Risk Manual

Definition

Credit Risk Mitigation means any technique used by a Credit Institution to reduce the credit risk associated with an exposure or exposures which the credit institution continues to hold[1]

Similar to more general Risk Mitigation, the options are broadly:

  • Attempt to modify the risk profile (changing the conditions or factors that contribute to credit risk), e.g. via additional collateral
  • Obtain some form of credit insurance (leaving the underlying credit risk unchanged but aiming to mitigate the impact)

References

  1. Directive 2006/48/EC Of the European Parliament and of the Council

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