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These draft Regulatory Technical Standards (RTS) align the treatment of non-financial counterparties (NFCs) established in a third country with the treatment of EU NFCs as recommended in the European Banking Authority (EBA) credit valuation adjustment (CVA) Report, published on 25 February 2015.
However, as NFCs established in a third country are not directly subject to EU regulation, these RTS clarify that it is for institutions to verify that a counterparty established in a third country qualifies as a NFC and, if that is the case, that the NFC does not exceed the clearing threshold set out in the European Market Infrastructure Regulation (EMIR).
Since in some cases verifying the status of NFCs established in a third country at the inception of each trade could be disproportionate for institutions, the EBA proposes that institutions have the option of carrying out such verification at trade inception or on a periodic basis.