Response to consultation on Guidelines on the treatment of CVA risk under SREP

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Question 1: Do you agree with determining relevance of CVA risk by means of assessing the size of an institution’s derivative business using the exposure value for non-QCCP cleared derivatives transactions?

According to the guidelines EAD should be calculated according to Part 3, Title 2, Chapter 6 of CRR. However, there are several methods provided, some of which take into account collateral (art. 276, standardized method) and others don’t (art. 274: MTM and art. 275 OEM).
The EAD resulting from these different calculating methods can have substantial differences, which may influence the threshold to be taken into account.
BCBS has published a new calculation method for EAD, SA-CCR (Standardized approach for measuring counterparty credit riks), effective date 1/1/2017.
This approach takes into account net collateral received, and the presence of a margin agreement. This should be considered as a standardized approach for determining EAD, also in view of the CVA risk relevance under SREP.

Question 2: What are your views on how Threshold 1 should be calibrated?

If EAD based: should depend on the method, with attention to the aspect if collateral and/ or margin agreement are taken into account.
For example: We currently use MTM method for EAD determination (art 274). When applying Sa-CCR as off 1/1/2017, the EAD of the derivatives portfolio would approximately decrease by 60% as a result of collateral and margin agreements in place.

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