CVA switchback will hit bank capital ratios, EBA says
Plan to end Europe's CVA exemptions will cause credit risk capital requirements to jump by 150%: one bank's capital ratio would fall three percentage points
European banks will see their counterparty risk capital requirements rise by over 150% if the region's exemptions for trades with corporates, pension funds and sovereigns are removed, according to the European Banking Authority (EBA). One unnamed bank faces a three-percentage point reduction in its equity capital ratio.
In a report released today, the EBA calls for the safe harbours to be scrapped, confirming a stance it first sketched out at a meeting in London in December.
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