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Review of the Credit Valuation Adjustment (CVA) risk framework - consultative document 

July 1, 2015

Bank for International Settlements

A Review of the Credit Valuation Adjustment Risk Framework is being undertaken by the Basel Committee. The objectives of the review are to (i) ensure that all important drivers of credit valuation adjustment (CVA) risk and CVA hedges are covered in the Basel regulatory capital standard; (ii) align the capital standard with the fair value measurement of CVA employed under various accounting regimes; and (iii) ensure consistency with the proposed revisions to the market risk framework under the Basel Committee's Fundamental review of the trading book. 

The Basel III capital framework already establishes a minimum capital charge to capture the potential mark-to-market losses faced by a bank from the deterioration in a counterparty's creditworthiness. This capital treatment addresses any variability in CVA that arises due to changes in credit spreads but does not take account of variability arising from daily changes in market risk factors (ie account exposure variability).

Read more: BIS

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