Status: Draft -- Not PublishedWill be live at 03/11/2020 13:20
IIF Joint Associations CP response - BCBS Final Revisions to CVA
The Institute of International Finance (IIF), together with ISDA and GFMA, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) Consultation Paper on the topic of Targeted Final Revisions to Credit Valuation Adjustment (CVA) Risk on February 25.
Targeted revisions such as the adjustment of the CVA multiplier, changes to risk weights, the aggregation formula, and the reconsideration of the scope of application to exclude immaterial security finance transactions are significant improvements over the 2017 CVA risk framework.
That said, further revisions are needed to address design and calibration within the framework.
The industry response letter discusses the misalignment between sound risk management practices and regulatory capital needs and makes a series of recommendations to achieve a better balance between the underlying risk and capital requirements and which are in keeping with the BCBS objectives of balancing risk sensitivity, simplicity, and consistency.