Staying alive: the EU’s stubborn CVA exemption

Delayed Pillar 2 capital charge could help US banks take EU market share in corporate hedging

Condemned at Basel almost four years ago, the European exemption from holding capital against credit valuation adjustment (CVA) risk on corporate derivatives exposures is the deviation that will not die. Now lawmakers look set to allow the European Banking Authority – a longstanding critic of the exemption – to decide its fate.

And yet, it seems banks and corporate treasurers may get to keep their hard-fought concession for another few years. In the latest strange twist in this long saga, it’s