The European Banking Authority has launched a consultation on Draft Regulatory Technical Standards (RTS) for credit valuation adjustment risk on the determination of a proxy spread and the specification of a limited number of smaller portfolios.
The proposed draft RTS elaborate on specific elements of the calculation of own funds requirements for credit valuation adjustment (‘CVA’) risk. In particular they specify:
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how a proxy spread should be determined for the purposes of identifying LGDMKT for the calculation required by Article 373(1); and
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the criterion of ‘a limited number of smaller portfolios’ referred to in Article 373(4).
The proposed consultation paper is based on the draft Capital Requirements Regulation (CRR), as proposed by the European Commission on 20th July, 2011. As the text is still being discussed by the EU legislator (European Parliament and Council), some of the mandates for the EBA to develop Binding Technical Standards (BTS) may be modified, added or deleted in the adopted Regulation. Therefore, the proposed RTS may be amended after the consultation to take into account the final CRR text.
These RTS have to be submitted to the EU Commission by 1 January, 2013. They will be part of the Single rulebook aimed at enhancing regulatory harmonisation in Europe. The consultation runs until 19 September.
Full consultation paper
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