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Version date: 8 July 2020 - onwards
Version 2 of 2

MAR50 Credit valuation adjustment framework (paras. 50.1-50.77) (effective as of 1 January 2023)

This chapter sets out how to calculate capital requirements to cover credit valuation adjustment risk.

Version effective as of 01 Jan 2023

Changes to give effect to the target revisions to the CVA framework published on the 8 July 2020.

Definitions and application

50.1 The risk-weighted assets for credit value adjustment risk are determined by multiplying the capital requirements calculated as set out in this chapter by 12.5.

50.2 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) due to a potential default of the counterparty.

50.3 Unless explicitly specified otherwise, the term CVA in this document means regulatory CVA. Regulatory CVA may differ from CVA used for accounting purposes as follows:

(1) regulatory CVA excludes the effect of the bank's own default; and

(2) several constraints reflecting best practice in accounting CVA are imposed on calculations of regulatory CVA..

50.4 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 transactions and SFTs.

50.5 The capital requirements for CVA risk must be calculated by all banks involved in covered transactions in both banking book and trading book. Covered transactions include: