EBA · 2024_7211 Rejected question

Calculation of the EAD in BA-CVA

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
384, para. 2
Topic
Market risk
Submitted by
Credit institution
Submitted
2024-10-04
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Question

To compute the BA-CVA, on netting sets for which an institution computes the EAD using its IMM model, can you confirm that the EAD calculated using current market data should be used?

Background

Article 284 of the CRR details the Exposure value computation for an institution permitted to use an internal method (IMM). Paragraph 284.4 states that "Exposure value" is computed as "alpha (α) times Effective EPE". Paragraph 284.3 adds that the own fund requirement (OFR) for counterparty credit risk is the higher of the OFR “calculated on the basis of Effective EPE using current market data” and the OFR “calculated on the basis of Effective EPE using a single consistent stress calibration”. Article 384 of the CRR related to the BA-CVA states that the EAD to be used to compute this metric is “the counterparty credit risk exposure value[…] including the effect of collateral in accordance with the methods set out in Title II, Chapter 6, Sections 3 to 6, as applicable to the calculation of the own funds requirements for counterparty credit risk referred to in article 92(4), point (a) and (f).”
No answer published yet.

Original source: European Banking Authority, Q&A ID 2024_7211

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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