The European Banking Authority (EBA) today published its Report on the impact and calibration of the Standardised Approach to Counterparty Credit Risk (SA-CCR), simplified SA-CCR and Original Exposure Method (OEM). The impact of setting alpha equal to 1 under SA-CCR for the purposes of the output floor (OF) on a permanent basis is also analysed.

• Estimated aggregate impact from the introduction of new counterparty credit risk (CCR) standard methods in the EU in terms of exposure value (EV) stands at -7.2% (+31% for the median bank). Larger banks mainly experienced negative impacts while banks with smaller derivative business displayed large positive impacts on CCR, but limited impact on total credit risk.
• Derivative business mainly moved from the Mark-to-Market Method (MtM) to the SA-CCR. Compared to the old methods, margined business is better recognised under SA-CCR.
• In terms of calibration, compared to the internal model method (IMM), SA-CCR produces EV figures 60% higher on average (+40% for the median bank). These results are in line with the BCBS objectives for the calibration of the SA-CCR framework. 
• Simplified SA-CCR EV figures are on average 60% higher than the SA-CCR ones (+40% for the median bank). The OEM is the most conservative approach: compared to simplified SA-CCR, average EV figures are 110% higher (+30% for the median bank).
• Setting alpha equal to 1 on a permanent basis under SA-CCR for the purposes of the OF reduces the impact of the OF only marginally (-0.2%).

Notes to editors 

The key findings of the Report, depicting the situation as of 31 December 2021, have been  visualised in a dynamic way. To facilitate the navigation, here is the full list of the key indicators that you can find in the graphs: 

• Overview (DOWNLOAD DATA)
• Impact (DOWNLOAD DATA)

Slide 1: total impact

Slide 2: impact of business moving from MtM

Slide 3: impact of business moving from SM

Slide 4: impact of business moving from ‘old’ OEM

• Relative calibration (DOWNLOAD DATA)

Slide 1: total figures

Slide 2: figures by collateralisation

Slide 3: figures by counterparty type

Slide 4: figures by CR approach

The analysis in the present report is based on both supervisory reporting data (COREP) and QIS data, with 31 December 2021 as reference date. QIS data have been collected via a dedicated template covering the impact and relative calibration of the standardised approaches for counterparty credit risk (‘EU CCR’), reported by institutions on a voluntary and best-effort basis.

The Report uses four main samples which differ significantly in terms of size and composition:

• COREP sample (1306 institutions – used to analyse the EU landscape regarding CCR);
• QIS impact sample (65 institutions);
• QIS calibration sample (40 institutions);
• QIS cumulative sample (160 institutions – used for the OF analysis).

To avoid double-counting, only credit institutions at the highest level of EU/EEA are included in the samples.

Legal basis and next steps

This Report has been drafted in accordance with Article 514(1) of Regulation (EU) No 575/2013, which requests the EBA to report to the Commission on the impact and relative calibration of the SA-CCR, simplified SA-CCR and new OEM, i.e. the CCR methods introduced under Regulation (EU) 2019/876 to replace the MtM, the Standardised Method (SM) and the old OEM.

In European Commission proposal for a Regulation amending the CRR (CRR3), an OF to the risk-based capital requirements is introduced. In Article 465(4) of the CRR3, transitional arrangements are envisaged. For CCR, until 31 December 2029, institutions with IMM permission shall replace alpha by 1 in the SA-CCR calculation of the exposure value for their derivative contracts. Such alpha value can be permanently modified for the purpose of the OF by the European Commission, taking into account this EBA Report. Therefore, the present report includes an analysis of the impact of setting alpha equal to 1 under SA-CCR for the purposes of the OF on a permanent basis.