The Basel Committee on Banking Supervision has published final revisions to the credit valuation adjustment risk framework under the Basel III standards. The updated international standard sets out the proposed regulatory capital treatment of CVA risk for derivatives and securities financing transactions. The CVA risk framework is designed to manage the risk of banks incurring mark-to-market losses from deterioration in the creditworthiness of counterparties in derivatives or SFTs. The framework was last revised in December 2017, partly to align it with the Basel Committee's market risk framework. The latest revisions include:
- The reduction of certain risk weights;
- The introduction of new index buckets and revised aggregation of CVA capital requirements;
- An amendment to the scope of portfolios subject to CVA risk capital requirements. SFTs, where the CVA risks stemming from such positions are not material, are excluded and certain client-cleared derivatives are exempt; and
- Revision of the overall calibration of the CVA risk framework, covering both the standardized and the basic approach.
View the updated CVA standard.
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