40.48 Principle 21: [Reference documents: IMF, External debt statistics – guide for compilers and users, 2013; BCBS, Management of banks’ international lending: country risk analysis and country exposure measurement and control, March 1982.] The supervisor determines that banks have adequate policies and processes to identify, measure, evaluate, monitor, report and control or mitigate country risk [Country risk is the risk of exposure to loss caused by events in a foreign country. The concept is broader than sovereign risk as all forms of lending or investment activity involving individuals, corporates, banks or governments are covered.] and transfer risk [Transfer risk is the risk that a borrower will not be able to convert local currency into a foreign currency and so will be unable to make debt service payments in a foreign currency. The risk normally arises from exchange restrictions imposed by the government in the borrower’s country.] in their international lending and investment activities on a timely basis.

40.49