Aggregated News From Investment Management Regulators

ECB finalises guide to assessing how banks calculate counterparty credit risk – MFSA

Report/Flag

Please complete the required fields.



The European Central Bank (ECB) today published the finalised guide outlining the methodology it uses to assess how euro area banks calculate their exposure to counterparty credit risk (CCR) and advanced credit valuation adjustment (CVA) risk, following a public consultation which ended on 18 March 2020.

These two risk types arise in derivatives trading and in transactions where securities are used to borrow or lend cash, such as repurchase agreements. Both activities entail the possibility that the counterparty may default. The global financial crisis has shown this to be one of the key financial risks a bank faces, since counterparty defaults can unleash systemic effects.

Under European Union law, banks are allowed to use internal models to calculate the value of their exposures to CCR and CVA risk as long as these models meet regulatory requirements. The guide published today explains the methodology the ECB uses to assess the validity of such models, especially in internal model investigations.

The text is also relevant when banks apply to extend or make changes to their models as well as for the ECB’s ongoing monitoring of such models.

The guide should not be construed as going beyond the currently applicable European Union and national laws and is therefore not intended to replace, overrule or affect said laws.

The ECB has given due consideration to all comments received during the consultation period and has published a feedback statement on its banking supervision website.

For full press release – Click here.

Source link

Regulator Information

Abbreviation: MFSA
Jurisdiction: Malta

Recent Articles

CVM warns of irregular performance by KOI Global LLC, Ventura Group and Orotrader as securities brokers

This post was translated by Regulatory.News for informational purposes only; the content below is not an official translation from the regulator. See the content...

Willers Consulting Group

We believe this firm may be providing financial services or products in the UK without our authorisation. Find out why you should be wary...

Stanley Associates LLC

We believe this firm may be providing financial services or products in the UK without our authorisation. Find out why you should be wary...

Adjudication order in respect of GKS Reality Private Limited in the matter of Illiquid Stock Options at BSE

This news item was originally published by the Securities and Exchange Board of India (SEBI IN). See the article here: Read more

Adjudication Order in respect of Nikhil Jalan and Sons HUF in the matter of Illiquid Stock Options at BSE

This news item was originally published by the Securities and Exchange Board of India (SEBI IN). See the article here: Read more

Get the latest from Regulatory.News in your inbox!

×