CRR: EBA consults on draft amending technical standards on CVA proxy spread

The European Banking Authority (EBA) has launched a consultation on draft amending RTS on credit valuation adjustment (CVA) proxy spread under the CRR. The new RTS propose limited amendments to the Commission Delegated Regulation No 526/2014 aimed at ensuring a more adequate calculation of own funds requirements for CVA risk. These proposals are based on recommendations made in the EBA's CVA report published in February 2015, which showed there were persistent difficulties in determining appropriate proxy spreads and LGDMKT for a large number of counterparties and recommended that the RTS should be amended to address these difficulties.

The EBA intends the proposed amendments to resolve the issues in identifying an appropriate proxy spread and LGDMKT by further specifying cases where alternative approaches can be used. This is expected to result in a more adequate calculation of own funds requirements for CVA risk, including in some cases a reduction of own funds requirements for CVA risk. In turn it is hoped that this will begin to remedy the over-estimation of current own funds requirements for counterparties in the scope of the CVA risk charge in the EU.

Comments on the consultation are due by 6 July 2016.