On April 6, 2016, the EBA published a consultation paper proposing amendments to the regulatory technical standards for determining proxy spread and the specification of a limited number of smaller portfolios for credit valuation adjustment risk under the Capital Requirements Regulation. On February 25, 2015, the EBA published a report on the relevance of the RTS provisions. In particular, the EBA focused on a CVA data collection exercise of 32 banks from 11 jurisdictions. The EBA concluded, based on the collection exercise, that there were difficulties in determining appropriate proxy spreads and market loss given default for a large number of counterparties because spreads may never be observed on markets. The amending RTS provides alternative approaches for the purpose of identifying appropriate proxy spread and market loss given default, in response to the issues outlined in the previous EBA report. The consultation invites responses on whether the amendments address the issues raised in the previous EBA report and whether the amendments are needed. Responses to the consultation are due by July 6, 2016.
The EBA consultation is available at: http://www.eba.europa.eu/documents/10180/1426637/EBA-CP-201604+%28Consultation+Paper+amending+RTS+on+CVA+proxy+spread%29.pdf .
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