New CRD IV draft exempts sovereign trades from CVA capital charge
The latest council draft adds a CVA capital charge exemption for sovereign derivatives transactions – potentially removing one of the big unintended consequences of CRD IV, participants say
Banks will not be hit with a capital charge for credit value adjustment (CVA) on trades conducted with European debt management offices and central banks under proposed amendments to European bank capital rules.
The exemption appears in the latest 816-page version of the fourth Capital Requirements Regulation and Directive, drawn up by the Council of the European Union (EU). In an earlier council draft, an exemption had been given to non-financial counterparties – which lawyers had interpreted
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