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Report BFA - Bankia 2014 / Risk managementCounterparty risk in financial markets

Credit/counterparty risk derives from the probability of a counterparty defaulting on its contractual obligations, resulting in the bank incurring a loss on its financial market trades. The Credit Risk of Market Trading Policy Manual is applicable in this area, setting out the policies for financial and non-financial entities and treasury desks, and defining global limits within which they can trade.

This manual chiefly includes the definition of counterparty risk and the type of products authorised, the definition of authorised parties and the criteria for assigning limits, the metrics used to calculate counterparty risk, and the measures to mitigate counterparty risk.