European dealers wrestle with corporate CVA changes
The proposed removal of Europe's corporate credit valuation adjustment exemption has already caused prices to diverge, say dealers, and could impact the credit derivatives market
Three years after refusing to apply the Basel Committee on Banking Supervision's counterparty credit risk capital charge to trades with corporates, the European Union is aiming to get back in line with its international counterparts.
However the path to removing the regulatory credit valuation adjustment (CVA) exemption is not smooth. It may come in sooner via an add-on capital charge, or later when legislation is drawn up to implement the new prudential market risk rules – or not at all, if
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