Article 382(5) of Capital Requirements Regulation (CRR) mandates the European Banking Authority (EBA) to develop, in cooperation with the European Securities and Markets Authority, regulatory technical standards (RTS) to specify the procedures for excluding transactions with non-financial counterparties (NFC) established in a third country from the own funds requirements for credit valuation adjustment (CVA) risk.
The EBA has now published its final draft RTS on the procedures for excluding transactions with NFC established in a third country from the own funds requirement for CVA risk under Article 382(5) of the CRR. The proposed draft RTS further clarify that the institution itself is responsible for taking the necessary steps to identify all NFCs that qualify for the exemption under Article 382(4)(a) of the CRR and calculate their own funds requirements for CVA risk accordingly. In particular, the proposed RTS specify that the institution should ensure that:
- those of its counterparties established in a third country that are subject to the exemption under Article 382(4)(a) of the CRR would qualify as a NFC if they were established in the EU; and
- the notional value of all over-the-counter derivative transactions of those NFCs do not exceed the clearing threshold specified in Article 10(3) and (4) of the European Market Infrastructure Regulation.
The EBA final draft RTS on exclusion of transactions with third country NFCs from CVA risk charge, 9 February 2017