Dealers push for further CVA amendments under Basel III

The Basel Committee modified its method for calculating the capital charge for credit value adjustment at the end of last year, following widespread criticisms from the industry. But quants continue to campaign for revisions that will allow them to take a more sophisticated approach. By Laurie Carver


Counterparty risk, and in particular the treatment of credit value adjustment (CVA), was always going to be a major focus for regulators post-crisis. The Basel Committee on Banking Supervision estimates two-thirds of credit risk losses during the financial crisis were caused by CVA volatility, rather than actual defaults – a figure that led the committee to propose a methodology for calculating a CVA capital charge in December 2009.

The original proposal, which included a so-called equivalent

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact or view our subscription options here:

You are currently unable to copy this content. Please contact to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options

Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here