Risk Annual Summit: CVA exemptions could backfire, panel warns

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European banks will be incentivised not to hedge if they are granted an exemption from the Basel III capital charge for credit valuation adjustment (CVA) – an outcome dubbed "crazy" by one panellist at the Risk Annual Summit in London this morning. But one of his fellow panellists argued the mooted exemption – for trades with corporates, sovereigns and pension funds – serves a sensible, wider purpose.

The exemption is included in compromise text for the fourth Capital Requirements Directive (CRD

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