30 May 2023

EBA publishes results on impact and calibration of standardised approaches for counterparty risk

The European Banking Authority (EBA) today published its Report on the impact and calibration of the Standardised Approach to Counterparty Credit Risk (SA-CCR), simplified SA-CCR and Original Exposure Method (OEM).

The impact of setting alpha equal to 1 under SA-CCR for the purposes of the output floor (OF) on a permanent basis is also analysed. 

• Estimated aggregate impact from the introduction of new counterparty credit risk (CCR) standard methods in the EU in terms of exposure value (EV) stands at -7.2% (+31% for the median bank). Larger banks mainly experienced negative impacts while banks with smaller derivative business displayed large positive impacts on CCR, but limited impact on total credit risk.
• Derivative business mainly moved from the Mark-to-Market Method (MtM) to the SA-CCR. Compared to the old methods, margined business is better recognised under SA-CCR.
• In terms of calibration, compared to the internal model method (IMM), SA-CCR produces EV figures 60% higher on average (+40% for the median bank). These results are in line with the BCBS objectives for the calibration of the SA-CCR framework. 
• Simplified SA-CCR EV figures are on average 60% higher than the SA-CCR ones (+40% for the median bank). The OEM is the most conservative approach: compared to simplified SA-CCR, average EV figures are 110% higher (+30% for the median bank).
• Setting alpha equal to 1 on a permanent basis under SA-CCR for the purposes of the OF reduces the impact of the OF only marginally (-0.2%).

EBA

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