The Bank for International Settlements ("BIS") Basel Committee on Banking Supervision proposed several "limited adjustments" to the credit valuation adjustment ("CVA") risk framework.
In the consultative document, "Credit Valuation Adjustment risk: targeted final revisions," the Basel Committee asked stakeholders to provide comment on the proposed adjustments to the December 2017 finalized Basel III standards, including:
updating the CVA risk framework to reflect the changes made in the market risk framework in January 2019 (see previous coverage), such as adjusting the risk weights in the CVA standardized approach ("SA-CVA") for interest rate risk, foreign exchange risk, and certain exposures subject to counterparty credit spread risk;
narrowing the scope of portfolios that are subject to CVA risk capital requirements by eliminating certain securities financing transactions ("SFTs") "where the CVA risks stemming from such positions are not material," and exempting certain client-cleared derivatives;
reducing the margin period of risk for certain centrally-cleared client derivatives in the SA-CVA; and
implementing a calibration adjustment of the SA-CVA.
Comments must be submitted by February 25, 2020. The revised CVA risk framework will be implemented on January 1, 2022.
The Basel Committee on Banking Supervision’s oversight body, and the Group of Central Bank Governors and Heads of Supervision, approved a set of final revisions to the market risk framework.
The Basel Committee on Banking Supervision ("BCBS") published its revised minimum capital requirements for market risk. The revised and standardized requirements are intended to replace the existing minimum capital requirements for market risk in the global regulatory framework.