A decision by European legislators in February to allow European Union (EU) banks to ignore a credit valuation adjustment (CVA) capital charge under Basel III when trading with corporates, sovereigns and pension fund has drawn a furious response from regulators outside the EU...
They claim their banks will be put at a competitive disadvantage, and bemoan the unlevel playing field this creates – and some jurisdictions are planning changes to how they apply the CVA charge in response.
However, it's not only non-EU entities that are concerned – some European regulators intend to use their powers under Pillar II of Basel III to add on additional capital requirements to take CVA into account.
In this video discussion, Nick Sawyer, editor-in-chief of Risk, and Duncan Wood, Risk's editor, discuss the CVA exemption, and the arguments against it.
This video will also appear in the July issue of the Risk app – download the Risk app for your iPad/iPhone by clicking here.