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Through the proposed amendments the EBA expects to ensure a more adequate calculation of own funds requirements for credit valuation adjustment (CVA) risk.
These draft amending RTS propose limited amendments to Delegated Regulation (EU) No 526/2014 and aim at further specifying cases where alternative approaches can be used for the purposes of identifying an appropriate proxy spread and LGD MKT.
The amendments follow on from policy recommendation No 7 and 8 of the CVA Report, published on 25 February 2015, which showed persistent difficulties in determining appropriate proxy spreads and LGD MKT for a large number of counterparties.
The amendments proposed are expected to lead to a more adequate calculation of own funds requirements for CVA risk, thus partially remedying the misalignment of the prudential CVA risk framework and the internal management of CVA risk.