EBA warns banks to correct pension fund CVA ‘mistake’

Linked exemptions that apply to clearing and capital for pension fund trades are becoming a worry for dealers. Under one reading, banks should only receive capital relief if the clearing exemption would apply – but some have granted it on a blanket basis, meaning they may be in breach of the rules.

Correct route: but fixing the problem will be difficult, banks say

Banks may be breaching European capital rules in trades with pension fund clients, dealers and lawyers are warning – the result of a largely unnoticed wrinkle in a pair of exemptions the funds enjoy. Fixing the problem will be difficult, banks say, and they are hoping regulators are in the mood to let it slide.

Regulators appear not to be in that kind of mood. Speaking to Risk, a policy expert at the European Banking Authority (EBA) in London says if dealers have not been applying a credit