Basel CVA bombshell widens gulf with bank accounting
Dealers face conflicting incentives and capital hike after internal models are blown away
Back in early March, banks were eagerly getting to grips with a supervisory exercise to calculate the capital impact of new proposals laid down by the Basel Committee on Banking Supervision.
The exercise – one of the committee's perennial quantitative impact studies – was meant to work out the effect of changes to the treatment of credit valuation adjustment (CVA) risk. The changes offered banks several different routes for capitalising CVA risk, including an internal models approach (IMA-CVA)
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