Dealers and end-users should have a credit risk management function with clear independence and authority, and with analytical capabilities in derivatives, responsible for:

• Approving credit exposure measurement standards.
• Setting credit limits and monitoring their use.
• Reviewing credits and concentrations of credit risk
• Reviewing and monitoring risk reduction arrangements.

The most effective method for minimizing credit risk relating to over-the-counter derivatives transactions is to establish appropriate internal guidelines and practices to assess and manage credit risk. The internal controls should be applied prior to the execution of a transaction and during all stages of the transaction´s life. For derivatives dealers, the establishment of credit lines and the monitoring of credit exposures should be done by an independent credit analysis group, rather than by people directly involved in the execution of the transaction (e.g., marketing or

trading personnel). End-users also should follow comparable procedures. Separation of responsibility is intended to prevent conflicts of interest and to ensure that the assessment of credit exposure is done objectively.