Prudential filters crimp some banks’ own funds, boost others
Two banks saw CET1 climb more than 5% at end-2019 through the EU’s valuation adjustments
Rules barring certain components of bank equity from counting as regulatory capital affect European Union banks in wildly different ways, reducing eligible own funds by as much as 8% at some lenders while increasing it by nearly 6% at others.
The EU’s Capital Requirements Regulation (CRR) applies a prudential filter to bank equity to sift out debit valuation adjustments (DVA) and fair value gains or losses on cashflow hedges. The filter also takes into account additional valuation adjustments
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