The European Banking Authority (EBA) launched a consultation on draft Regulatory Technical Standards (RTS) to specify the conditions and the criteria to assess whether the credit valuation adjustment (CVA) risk exposures arising from fair-valued securities financing transactions are material, as well as the frequency of that assessment.
The concept of materiality set out in the draft RTS will determine whether fair-valued securities financing transactions can be exempted from own funds requirements for CVA risk.
The draft RTS propose to use a quantitative threshold approach to determine the materiality of CVA risk exposures arising from fair-valued securities financing transactions. In particular, the draft RTS set out a ratio that quantifies the amount of CVA risk arising from fair-valued securities financing transactions relative to the CVA risk of transactions within the scope of own funds requirements for CVA risk.
To ensure consistency with the regular calculation and reporting cycle of own funds requirements by institutions, the draft RTS propose to do the assessment on a quarterly basis.