Risk Annual Summit: CVA exemptions could backfire, panel warns


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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