risk, and respond in those cases. still, it does not matter if a bank has ample reporting, the best counterparty risk measurement capabilities in the world, and perfectly calibrated limits : if risks are ignored by key decisionmakers, or if individuals with responsibility for managing the risk don't have influence on the firm's business decisions, the firm is not engaging in effective credit risk management. of course, having good governance and risk culture is in part about the basics : banks should ensure that they have capable people with the skills necessary to manage the risk ; adequate staffing levels ; strong documentation ; and clear roles, responsibilities, and accountability. it also means banks need to create a risk culture that prioritizes timely and comprehensive communication and information sharing across the organization, and that banks respect the views of risk managers about when to avoid taking bad risks. international cooperation is vital counterparty credit risk can have global implications because financial markets, and banks'trading businesses and their clients, are often global. international cooperation is vital to promote the smooth functioning of markets that move around the globe and to ensure a level playing field for american financial institutions. after the failure of ltcm, the basel committee on banking supervision published " sound practices for banks'interactions with highly leveraged institutions, " much of which remains relevant today. 4 as this gathering shows, the basel committee continues to play a leading role in bringing together bank supervisors to solve challenging problems that cross borders and recommending solutions to ensure consistent global standards. this conference is also a byproduct of the default of archegos in march 2021, which was a counterparty of numerous banks. as supervisors of some of those institutions, the federal reserve and the united kingdom's prudential regulation authority led a valuable post - mortem effort with numerous other domestic and international supervisory authorities to investigate the causes and associated risk management failures that led to such significant and widespread financial stress. conclusion we all have an interest in seeing that counterparty credit risk management practices are commensurate with the inherent complexity, materiality, and interconnectedness of trading activities. this is even more important today than when ltcm collapsed in 1998. since that time, the hedge fund industry is much larger, with funds currently reporting around $ 9 trillion in assets, 5 and many funds are leveraged and 4 / 5 bis - central bankers'speeches interconnected with major banks. getting this right is in the interest of banks, their customers, and the public

the issuer pay model, the issuer of the debt or the borrower commissions the credit rating either voluntarily or to comply with regulatory requirement. in india, as far as public issue of debt is concerned, regulations by the securities and exchange board of india and reserve bank of india make it mandatory for the issuers to obtain a credit rating. as far as the bank loans are concerned there is no such mandatory requirement, even though the capital bis central bankers ’ speeches requirements of banks with regard to corporate loans are dependent on credit ratings. banks may at their discretion require borrowers to obtain credit ratings. the advantages of issuer - pay model is that, ratings once assigned and accepted, are disclosed publicly and is available for users at free of charge. small investors and individuals who wish to invest in debt securities need not pay for accessing the credit ratings. another advantage of this model could be that issuers may be more forthcoming in sharing information as they are the ones who have commissioned the rating. however, there is an inherent conflict of interest in this model. since the income and profits of credit rating agencies are dependent upon the volume of ratings they assign, there may be a tendency to assign inflated ratings to acquire and retain clients. the financial crisis inquiry commission ( 2011, page 212 ), which went into the causes of the financial and economic crisis in the united states, has concluded that “ …. the business model under which firms issuing securities paid for their ratings seriously undermined the quality and integrity of those ratings ; the rating agencies placed market share and profit considerations above the quality and integrity of their ratings ”. such conclusions on the contribution of credit rating agencies to the recent financial crisis have led to calls for tougher regulatory oversight on credit rating agencies. to conclude, we can see that among the proactive steps that a bank can take to stem the problem of increasing level of npas and stressed assets, use of credit ratings is an important one. banks can use the external ratings as third party, professional assessment, either as a stand - alone basis or in combination with their own internal ratings. however, banks need to balance the use of external ratings, as the recent financial crisis has highlighted the dangers of over dependence on ratings. i am sure today ’ s deliberations will result in a lot of suggestions that can be used by regulators like rbi and sebi to bring in improvements in the policy frameworks. i look forward to receive them from the organizers. thanking you all for your patient attention