The European Banking Authority (EBA) has published a consultation paper on draft guidelines on the treatment of credit value adjustment (CVA) risk under the supervisory review and evaluation process (SREP) and a data collection exercise for the quantitative impact study (QIS).
Under article 456 of the Capital Requirements Regulation, the EBA is mandated to monitor the own fund requirements for CVA risk. Following the publication of its CVA Report, published in February 2015, which identified a number of possible improvements to the CVA framework, the EBA committed itself to developing guidance addressed to competent authorities and institutions on how to treat CVA risk under SREP in a coordinated manner.
The EBA notes that the draft guidelines implement a policy recommendation of the CVA Report and should be read in conjunction with its guidelines on common methodologies for SREP, published in December 2014. In particular, the draft guidelines would allow competent authorities to:
- determine the relevance and materiality of CVA risk for an institution;
- assess any material CVA risk under SREP;
- assess the adequacy of own funds to cover material CVA risk; and
- determine additional own funds requirements, where the risk is not adequately covered by the minimum own funds requirements, in particular due to the exemptions in the EU legislative framework.
Alongside the consultation, the data collection exercise for the QIS was launched to ensure appropriate calibration of the threshold value, to be included in the final recommendation.
The deadlines for comments on the consultation paper and for completing the data collection exercise are, respectively, 12 February and 28 January 2016.
View EBA consults on draft guidelines on the treatment of CVA risk under SREP, 12 November 2015