EBA · 2022_6404 Question under review

EAD value for CVA calculation

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
384, para. 1
Topic
Market risk
Submitted by
Credit institution
Submitted
2022-03-23
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

Is the the EADiTotal in paragraph 1 gross of or net of incurred CVA. The definition provided by the regulation states that the effect of the collateral should be included but there is no reference as towards the incurred CVA regognised by the Bank as a write-down which under article 273 par.6 is applied in the calculation of the CCR RWA. "EAD total i = the total counterparty credit risk exposure value of counterparty ‘i’ (summed across its netting sets) including the effect of collateral in accordance with the methods set out in Sections 3 to 6 of Title II, Chapter 6 as applicable to the calculation of the own funds requirements for counterparty credit risk for that counterparty. An institution using one of the methods set out in Sections 3 and 4 of Title II, Chapter 6, may use as the fully adjusted exposure value in accordance with Article 223(5)."

Background

Article 273 par. 6 6. Under all methods set out in Sections 3 to 6, the exposure value for a given counterparty shall be equal to the sum of the exposure values calculated for each netting set with that counterparty. For a given counterparty, the exposure value for a given netting set of OTC derivative instruments listed in Annex II calculated in accordance with this Chapter shall be the greater of zero and the difference between the sum of exposure values across all netting sets with the counterparty and the sum of CVA for that counterparty being recognised by the institution as an incurred write-down. The credit valuation adjustments shall be calculated without taking into account any offsetting debit value adjustment attributed to the own credit risk of the firm that has been already excluded from own funds under Article 33(1)(c).
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Original source: European Banking Authority, Q&A ID 2022_6404

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.

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