Counterparty credit risk management in industrial corporates

Abstract

Ever since the financial crisis of the banking system of 2008 - 2010 the paradigm that deposits or other exposures towards major banks are safe has been fundamentally questioned. This put industrial corporates, who to support their business usually need to manage significant cash holdings or incur counterparty credit risk via derivatives, in the situation to develop or extend their resources for counterparty credit risk management. This paper provides a comprehensive overview over the practical issues into the subject benefitting largely from the findings of an interview series conducted with the respective heads of counterparty and customer credit risk management in the time period April - September 2011 of 25 large european enterprises with a large subset being members of the German DAX Index.Financial Risk Management; Credit Risk; Counterparty Credit Risk; CCR Management; Organisation; Financial Controlling; Financial Institutions; Banks