Central Bank issues new guidelines on credit risk

Following a statement of the Basel Committee on Banking Supervision in 1998, the Central Bank (DNB) has promulgated new guidelines on credit risk. The new guidelines, effective as of 1 July 2000, will improve on balance sheet netting possibilities for banks. One of the conditions under which netting will be possible, will be the existence of a bilateral netting contract providing for the arising of one single enforceable obligation which covers all (sub) agreements. Different currency denominations do not need to stand in the way of netting. DNB has also clarified its position on the solvency requirement as regards outstanding offers, long term credit facilities as well as claims which are backed by solvency free collateral.