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The Basel Committee on Banking Supervision published a paper on Thursday that proposes changes to the credit valuation adjustment (CVA) risk framework.

“CVA risk is the exposure to changes in counterparty credit spreads and other market risk factors,” the Basel Committee explained. “It is typically incurred by banks that undertake derivative or securities financing transactions, which run the risk of mark-to-market losses if the creditworthiness of the counterparties deteriorates.”

The proposed revisions aim to bring the CVA framework into better alignment with the market risk framework, which was updated earlier this year.

Additionally, the paper proposed altering the scope of portfolios that must set aside capital for CVA risk and adjusting the overall capital calculations.

The revised CVA risk framework is to be implemented on Jan. 1, 2022. Comments on the consultation paper are due by Feb. 25, 2020.