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Version date: 7 December 2017 - onwards

Minimum capital requirements for CVA risk

A. General provisions

1. In the context of this document, CVA stands for credit valuation adjustment specified at a counterparty level. CVA reflects the adjustment of default risk-free prices of derivatives and securities financing transactions (SFTs) as defined in paragraphs 4 and 5 of Annex 4 of the Basel II framework due to a potential default of the counterparty. Regulatory CVA may differ from CVA used for accounting purposes as follows: (i) regulatory CVA excludes the effect of the bank's own default; (ii) several constraints reflecting best practice in accounting CVA are imposed on calculations of regulatory CVA, so some banks may find that regulatory CVA deviates from their accounting CVA. Unless explicitly specified otherwise, the term "CVA" in this document means "regulatory CVA".

2. CVA risk is defined as the risk of losses arising from changing CVA values in response to changes in counterparty credit spreads and market risk factors that drive prices of derivative transaction