EBA · 2023_6899 Rejected question

Application of discount scalar (DS) in the calculation of CVA under reduced basic approach described in Article 384(3)

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
384, para. 3
Topic
Market risk
Submitted by
Credit institution
Submitted
2023-09-29
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Question

Shall a discount scalar (DS) equal to 0,65 be applied to a calculation of CVA under reduced basic approach under article 384(3)?

Background

Article 384 presents two alternative formulas for calculation of own funds requirement for CVA risk under basic approach (BA-CVA). The full version of BA-CVA described in the Article 384(2) includes in the calculation one or more eligible hedges recognised in accordance with article 386. Institutions which do not not include any eligible hedges in the calculation of own funds requirements of CVA risk, shall follow the reduced version of BA-CVA  described in Article 384(3) of the CRR.    Comparing the two alternative formulas, when eliminating the effect of hedging, full version of BA-CVA gives more advantageous results than the reduced version, due to the application of discount scalar equal to 0,65 presented in Article 384(2).
No answer published yet.

Original source: European Banking Authority, Q&A ID 2023_6899

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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