EBA publishes final draft RTS on credit valuation adjustment risk of SFTs

The European Banking Authority (EBA) has published its final report on the draft regulatory technical standards (RTS) under Article 382(6) of the Capital Requirements Regulation (CRR), as amended by CRR3. The RTS establish a quantitative framework for assessing the materiality of credit valuation adjustment (CVA) risk exposures arising from fair-valued securities financing transactions (SFTs). Following feedback to the July 2024 consultation, the EBA retained its proposed quantitative approach to assessing materiality, opting for a ratio-based threshold of 5% to determine whether such transactions should be included in CVA capital requirements. The final RTS also uphold quarterly assessments aligned with COREP reporting cycles and clarify that the CVA capital requirement metric, rather than broader own funds or exposure values, should be used for the materiality test.

A notable change has been made to the proposed stabilisation mechanism. While it was initially proposed that institutions include fair-valued SFTs in scope if any of the last four quarterly ratios exceeded the materiality threshold, the final RTS now require a point-in-time assessment based solely on the current reference date. This revision ensures that CVA risk is capitalised only when present, aligning more closely with the Level 1 text and avoiding unnecessary capital requirements based on past exposures. The draft RTS will be submitted to the European Commission for adoption following which they will be subject to scrutiny by the European Parliament and the Council of the EU before being published in the Official Journal of the European Union.

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