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Swiss Bankers Association Issues New Guidelines for Country Risk Management

Introduction

The Swiss Bankers Association has issued new guidelines for country risk management, aimed at ensuring that banks in Switzerland adopt a consistent approach to managing their exposure to foreign markets.

Key Requirements

To comply with these guidelines, banks must:

  • Identify and measure their country risk exposure
  • Develop a country risk policy and implement an adequate internal control system
  • Provide regular reports to senior management and the board of directors
  • Make value adjustments and provisions for future unexpected losses based on their own valuation principles and within the scope of current accounting rules

Identification and Measurement

Country risk must be identified and measured for each bank, taking into account factors such as:

  • Creditworthiness
  • Political instability
  • Economic conditions

Banks with significant foreign exposure are required to have an adequate internal control system in place to monitor compliance with country risk limits and detect any limit violations in a timely manner.

Disclosure and Reporting

Banks must disclose their foreign exposure by country rating in their annual reports.

Effective Date and Transition Period

These guidelines take effect from December 31st, 1997. A transitional period until December 31st, 1999 allows banks to continue applying the current Federal Banking Commission regulations on minimum provisions for country risk during this time.

Key Points:

  • The Swiss Bankers Association has issued new guidelines for country risk management
  • Banks must identify, measure, and manage their country risk exposure
  • A country risk policy must be developed and implemented
  • An adequate internal control system must be in place to monitor compliance with country risk limits
  • Value adjustments and provisions for future unexpected losses must be made
  • Foreign exposure by country rating must be disclosed in annual reports

Effective Date: December 31st, 1997

Transition Period: Until December 31st, 1999