Name concentration risk refers to the potential for loss that arises when a financial institution has significant exposure to a single counterparty or borrower. This risk occurs when a large portion of the institution’s loans or investments is concentrated in one individual or entity, making it vulnerable to that counterparty’s financial difficulties or defaults. Effective management involves setting limits on exposure to any single name, conducting thorough credit assessments, and diversifying the portfolio to mitigate the impact of potential losses from a specific counterparty.

Basel scope:

• Pillar 2

Capital requirements:

Mitigated by Capital

Related Links:

•       BCBS 347 - Revisions to the Standardised Approach for credit risk
•                 Fed / OCC / FDIC - Single‑Counterparty Credit Limits (SCCL) for large banking organizations
•                 The Basel framework
•                 BCBS 424 - Basel III: Finalising post-crisis reforms
•                 Basel Framework