Holding of minimum defined regulatory capital for all OBS exposures, collection of periodic supervisory data and incorporating transparency and disclosure requirements in bank balance sheet are some of the major regulatory initiatives undertaken to control and monitor OBS exposures of the banking system.
The rapid proliferation of derivatives exposures inevitably poses a challenge on account of the downside risks associated with them, if not managed properly. There are issues relating to use of structured products, valuation, counterparty related issues, risk management and reporting issues and last but not the least, training and skill development.