EBA · 2015_2252 Final Q&A

Break clauses in capital requirements and Residual maturity

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
384
Topic
Market risk
Submitted by
Competent authority
Submitted
2015-08-24
Answered
2016-12-09
Answer provided by
ESAs (EBA, ESMA, EIOPA)
Browse ECB SSM Register → More Q&As on this regulation →

Question

In a swap contract with break clauses, basically with an enforceable option of early termination by one of the counterparties, which is the residual maturity to be considered for the application of the CVA capital charge in article 384 of CRR? The residual maturity of the original contract or the residual maturity for the break clause date?

Background

The situation described in the question is regarding to a swap contract with an (enforceable) option of early termination by one of the counterparties and the residual maturity to consider when the capital requirements are calculated under the scope of Article 384 CRR. This article (standardised approach for capital requirements calculation on CVA risk) has no explicit reference to this situation regarding to residual maturity neither links to other CRR articles with this information.

Answer

The treatment of a swap contract with option of early termination by one of the counterparties has no explicit reference in Article 384 Regulation (EU) No 575/2013 (CRR). In the light of this situation, institutions shall apply the residual maturity since this approach ensures the most prudent approach from regulatory perspective.

Original source: European Banking Authority, Q&A ID 2015_2252

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

Similar Q&As

Mark-to-Market Method: remaining maturity for early-termination clauses (ETC)

Answered 2021-05-07

Maturity floor in Standard Method for CVA

Answered 2022-11-11

Treatment of Repo and Reverse repo with bilateral early termination option

Answered 2022-02-11

Use of the “maturity of the tranche” (MT) as defined in Article 257 CRR as the “residual maturity” for purposes of the volatility adjustments for securitisation positions under Table 1 of Article 224(1) CRR.

Answered 2021-12-17

Exclusion of provisioned counterparties from the CVA capital charge

Answered 2013-11-15

More Q&As on this topic

Application of Article 207(2) of the CRR to financial collateral under the counterparty credit risk framework

Answered 2026-05-29

SPV repack transactions

Answered 2026-05-29

Exclusion of back-to-back positions from RRAO

Answered 2025-10-31

Sources for external classification that is commonly used in the market for grouping issuers by sector, for the purpose of CRR Article 325ah.

Answered 2025-10-17

Multilateral development banks classification for the purpose of article 325ah

Answered 2025-06-27

📋 Track EU financial regulation continuously

Forseti monitors EU financial regulation and delivers personalised alerts anchored to verified official sources.

Start free trial → Learn more

14-day free trial. No credit card required.