Three Japanese banks consider new CVA approach

Industry working group formed to discuss introducing accounting adjustment

Wallet containing a yen banknote
Credit valuation adjustments could make derivatives trading more costly

Japanese banks have formed a working group to explore the introduction of an accounting adjustment for derivatives counterparty credit risk, which could increase the cost of trading for local corporates. The Japanese Bankers Association (JBA) has formed a group including Mitsubishi UFJ Financial Group, Mizuho and Sumitomo Mitsui Banking Corporation to discuss the measure, known as accounting credit valuation adjustment (CVA). The Japanese Financial Services Agency is present as an observer,