Capital adequacy

EBA final draft technical standards on market risk and CVA risk

The European Banking Authority (EBA) has published the following:

final draft regulatory technical standards (RTS) on the definition of market under article 341(3) of the Capital Requirements Regulation (CRR). The RTS relate to the definition of the term “market” to be applied for the calculation of the overall net position in equity instruments under the market risk standardised rules. The definition of market is based on a currency criterion, but solely for jurisdictions included in the eurozone. For other jurisdictions, market is defined using a nationality criterion;
final draft RTS on credit valuation adjustment risk (CVA risk) for the determination of a proxy spread and the specification of a limited number of smaller portfolios under article 383(7) of the CRR. The RTS specify the data quality requirements and the minimum granularity of the attributes of rating, industry and region that institutions should consider when estimating an appropriate proxy spread for the determination of the own funds requirements for CVA. The RTS also specify the number and size of portfolios that meet the criterion of a limited number of smaller portfolios and, therefore, are allowed into the CVA advanced approach despite not forming part of the scope of the internal model method for counterparty credit risk; and
an opinion on CVA risk for the determination of a proxy spread. The opinion supplements the RTS on CVA risk and elaborates on the approach taken by the EBA in determining a proxy spread.