Calculation of the threshold for using the simplified approach for the determination of AVAs.

Q&A 2015_1715 defines ‘Exactly matching, offsetting assets and liabilities’ as ‘positions for which all contractual future cash flows are identical and in opposite direction under any circumstances’. The criteria `identical´ only refers to the cash-flows, not to the counterparty. Hence, offsetting positions with different counterparties may be considered as exactly matching, provided the above criteria are met. As regards the threshold computation, Article 4(2) explicitly excludes ‘exactly matching, offsetting fair-valued assets and liabilities’ from the threshold computation, as well as from the determination of AVAs under the simplified approach, as set out in Article 5. This is regardless of the counterparty, which is also consistent with the simplified nature of the simplified approach.  As regards the computation of AVAs under the core approach, Article 8(1) stipulates that ‘for fair-valued assets and liabilities for which a change in accounting valuation has a partial or zero impact on CET1 capital, AVAs shall only be calculated based on the proportion of the accounting valuation change that impacts CET1 capital’. However, the application of Article 8(1) is dependent on the valuation positions considered for the computation of the AVA concerned. Indeed, while in line with  Q&A 2015_1715 , ‘exactly matching, offsetting fair-valued assets and liabilities’, as defined above, are to be disregarded for most AVA types, it might not be the case when the position in itself is driven by its counterparty. It is expected that, where the AVA is computed from a perspective (i.e. the counterparty) where valuation positions do not appear to be ‘exactly matching, offsetting fair-valued assets and liabilities’, then those valuation positions cannot be considered as matching for the purposes of computing the AVA: this is especially true for the unearned credit spread AVA, which is computed at counterparty level.