The European Banking Authority (EBA) announced today it has put on hold its draft Guidelines on the treatment of CVA risk under SREP until further notice, due to continued developments in the CVA risk framework at international level. However, monitoring work continues with the EBAs 2016 credit valuation adjustment (CVA) risk monitoring exercise, which was launched today. The exercise fits into the EBA mandate to monitor the own funds requirements for CVA risk and follows on from policy recommendation No 4 of the CVA Report. The EBA expects institutions to complete the exercise by 14 September 2017.
The 2016 CVA risk monitoring exercise is the latest data collection exercise to be performed on CVA risk. The first exercise was launched as part of the CVA Report and a second exercise was performed simultaneously to the consultation on the Guidelines on the treatment of CVA risk under SREP. The 2016 CVA monitoring will be based on data with reference date of 31 December 2016.
Due to continued developments in the CVA risk framework at international level, the EBA has put on hold the work on its draft Guidelines on the treatment of CVA risk under SREP until further notice. Instead, the EBA will focus on monitoring the impact of transactions exempted from the CVA risk charge and assessing the impact of the revised international standards on CVA risk, in particular on the scope of exempted transactions, once the standards are made public. Competent authorities will use the outcome of the EBA monitoring in their assessments of institutions' CVA risk performed in accordance with the EBA Guidelines on common procedures and methodologies for SREP
(2014). The EBA will closely follow international (BCBS) developments and, if needed, will review whether further guidance is needed to achieve greater consistency in appropriate risk-based supervisory measures.
Similar to the previous exercise, institutions included in the EBA list of institutions, for which the EBA is receiving COREP submissions, will be required by their competent authority to participate in the exercise on a compulsory basis. Relevant institutions will be requested to provide the data required in the accompanying template by 14 September 2017. In order to help institutions fill in the template, instructions are also available on the website. 2
Last year's exercise involved 171 EU banks representing 28 EU and 1 EEA member states. A short report presenting the main results of the 2015 CVA risk monitoring exercise is also published today.
Legal basis and background
Article 456(2) of Regulation (EU) No 575/2013 mandates the EBA to monitor the own funds requirements for credit value adjustment risk. In the CVA Report published in February 2015, the EBA identified a number of possible improvements to the CVA framework that should be introduced at European level and should be taken into account in the revision of the Basel CVA framework. Furthermore, the EBA committed to yearly monitoring the impact of transactions exempted from the CVA risk charge as part of a CVA risk monitoring exercise coordinated by the EBA until the Basel and European CVA frameworks have been revised.