Amending RTS on CVA proxy spread

Status: Final draft adopted by the EBA and submitted to the European Commission

These amending RTS on CVA proxy spread address difficulties associated with the determination of proxy spreads for large numbers of counterparties as well as issues linked with LGDMKT. They specify cases where alternative approaches can be used for the purposes of identifying an appropriate proxy spread and LGDMKT thus leading to a more adequate calculation of own funds requirements for CVA risk.

EBA publishes draft amending technical standards on CVA proxy spread

EBA publishes draft amending technical standards on CVA proxy spread

21 June 2017

The European Banking Authority (EBA) published today its draft amending Regulatory Technical Standards (RTS) on credit valuation adjustment (CVA) proxy spread. These RTS propose limited amendments to the Commission Delegated Regulation (EU) No 526/2014 for determining proxy spread and limited smaller portfolios for credit valuation adjustment risk, based on two policy recommendations contained in the EBA's CVA report, published on 25 February 2015. Through the proposed amendments the EBA expects to ensure a more adequate calculation of own funds requirements for CVA risk. 
 
These draft amending RTS propose limited amendments to Delegated Regulation (EU) No 526/2014 and aim at further specifying cases where alternative approaches can be used for the purposes of identifying an appropriate proxy spread and LGD MKT. 
 
The amendments follow on from policy recommendation No 7 and 8 of the CVA Report, published on 25 February 2015, which showed persistent difficulties in determining appropriate proxy spreads and LGD MKT for a large number of counterparties. 
 
The amendments proposed today are expected to lead to a more adequate calculation of own funds requirements for CVA risk, thus partially remedying the misalignment of the prudential CVA risk framework and the internal management of CVA risk. 

Legal basis and background

The draft amending RTS have been developed according to Article 383(7) of Regulation (EU) No 575/2013 (Capital Requirements Regulation – CRR), which mandates the EBA to develop draft RTS to specify how a proxy spread is to be determined for the purposes of identifying si and LGD MKT.
 

Press contacts:

Franca Rosa Congiu

E-mail: press@eba.europa.eu - Tel: +44 (0) 207 382 1772