EBA欧洲银行-Public-hearing-Treatment-of-material-CVA-risk-in-SREP_15页_1mb

Summary of EBA Guidelines on the Treatment of CVA Risk under SREP

Core Content

This document outlines the European Banking Authority (EBA) guidelines on the treatment of Credit Valuation Adjustment (CVA) risk within the Supervisory Review and Evaluation Process (SREP) as part of the EU's regulatory framework. The EBA aims to ensure that CVA risk is appropriately assessed and managed, particularly for banks that are not fully covered by the minimum own funds requirements under the Capital Requirements Regulation (CRR).

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Main Rationale of Pillar 2 Approach

The Pillar 2 approach is designed to ensure that banks with significant CVA risk are subject to additional capital requirements beyond the minimum set by Pillar 1. The EBA emphasizes that these additional requirements should be based on a supervisory assessment, not an automated application of Pillar 1 methodologies. The key principles include:

• Relevance and Proportionality: The guidelines apply only to banks with material derivatives business.
• Supervisory Judgement: The EBA provides benchmarks and thresholds to assist supervisors in their decision-making process.
• Convergence: The approach aims to create a consistent supervisory methodology across the EU.

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Key Elements of the Draft Guidelines

The EBA is developing a two-step process for CVA risk treatment under SREP:

1. Guidelines on the Treatment of CVA Risk under SREP

   • Define general criteria for assessing materiality, risk, and capital adequacy.
   • Establish a framework for determining additional own funds requirements.

2. Recommendation for Competent Authorities

   • Provide practical implementation guidance.
   • Include threshold values for all formulas outlined in the guidelines.

The guidelines are based on the 2014 EBA SREP procedures and reflect the findings of the CVA report, which identified significant gaps in how CVA risk is assessed internally by banks.

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Supervisory Assessment Process

Identifying Most Exposed EU Banks

• Banks with non-significant OTC derivative business are excluded from the assessment.
• For other banks, a hypothetical CVA risk charge is calculated, including transactions with:
  • Non-financial counterparties
  • Sovereign counterparties
  • Pension schemes
  • Intra-group entities

This charge is based on the current CRR methodology but includes improvements reflecting industry practices.

Assessing Material CVA Risk and Allocated Capital

• Competent authorities evaluate:
  • The source of CVA risk (e.g., concentration on specific counterparties)
  • Whether the bank has adequately managed and capitalised this risk internally
• A risk score is assigned to each institution based on the assessment.

Supervisory Reaction

• If a bank is found to have material CVA risk that is not adequately managed, competent authorities may impose additional own funds requirements.
• A supervisory benchmark is introduced to help determine appropriate thresholds for intervention.

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Proportionality and Impact Assessment

The EBA is conducting a Quantitative Impact Study (QIS) alongside the public consultation to assess the impact of the proposed thresholds and methodologies. The QIS involves 200 banks and focuses on:

• Calibration of Threshold 1 (exposure value): 10, 50, 100, or 150 million EUR
• Calibration of Thresholds 2 and 3 (x%): 0.5%, 1%, 2%, 3%, or 4%
• Calibration of Threshold 4 (y%): 40%, 50%, 60%, or 70%

The EBA will analyze these thresholds and recalibrate them as necessary to achieve a long-term solution.

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Next Steps

• QIS data to be submitted by 28 January 2016
• Public consultation answers to be submitted by 12 February 2016
• Draft Guidelines and Recommendation to be finalized by mid-2016

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Key Questions for Consultation

The EBA has posed the following questions for public feedback:

1. Do you agree with using exposure value for non-QCCP cleared derivatives to assess the relevance of CVA risk?
2. What are your views on how Threshold 1 should be calibrated?
3. Do you agree with using the share of own funds requirements for CVA risk to the total risk exposure amount to assess relevance?
4. Do you agree with the approach for determining the materiality of CVA risk?
5. What are your views on how ‘x%’ (Thresholds 2 and 3) should be calibrated?
6. Do you agree with the scope of derivative transactions included in the hypothetical own funds requirements?
7. Should intra-group derivatives transactions be explicitly included? If not, what alternative approach do you suggest?
8. Do you agree with the supervisory benchmark approach for material CVA risk?
9. What are your views on how ‘y%’ (Threshold 4) should be calibrated?
10. Do you agree with the proposed monitoring approach and data sharing?
11. Do you think the frequency of computing hypothetical own funds requirements is too burdensome compared to regulatory CVA VaR and Stressed VaR figures?

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EBA Contact Information

EUROPEAN BANKING AUTHORITY
Floor 46, One Canada Square, London E14 5AA
Tel: +44 207 382 1776
Fax: +44 207 382 1771
E-mail: info@eba.europa.eu
Website: www.eba.europa.eu