Dealers fret over Basel CVA revisions
The Basel Committee’s overhaul of its derivatives counterparty risk rules was designed to align regulatory requirements with market practice. It was initially welcomed by dealers, but some now fear they may be forced to use a more punitive standardised approach
When it emerged that the Basel Committee on Banking Supervision was to overhaul its framework for calculating capital requirements for derivatives counterparty risk, dealers cheered – the capital rules had always diverged from market practice, so this was seen as an opportunity to better align them with the way the risk is managed in reality.
When the new credit valuation adjustment (CVA) capital proposals were released in July, it appeared that banks' prayers had been answered. They could
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