Japan banks face huge CVA hit, dealers say

Revaluation of derivatives books likely to cause hundreds of millions in one-off losses

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Three Japanese megabanks are expected to start reflecting the market value of counterparty risk in their derivatives portfolios for the first time in the next round of financial results, a change in the banks’ pricing methodologies that could result in sizable revaluation losses.

Experts believe the losses could be on a similar scale to the $712 million hit to Standard Chartered in 2016, which followed revisions to the way the bank reports its credit valuation adjustment (CVA).

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