4.1 This chapter provides feedback to responses to Chapter 7 of consultation paper (CP) 16/22 - Implementation of Basel 3.1 standards, which set out proposals to implement the Basel 3.1 standards for methodologies for credit valuation adjustment (CVA) risk. CP16/22 also proposed to amend the scope and calibration of the CVA risk and standardised approach to counterparty credit risk (SA-CCR) frameworks. This chapter also sets out the Prudential Regulation Authority's (PRA) near-final policy on CVA and SA-CCR following the consultation.

4.2 In CP16/22, the PRA proposed to implement the Basel 3.1 CVA risk framework methodologies for calculating capital requirements, comprising three new approaches: the alternative approach (AA-CVA), the basic approach (BA-CVA), and the standardised approach (SA-CVA). The new methodologies would replace the existing methodologies and improve the risk-sensitivity and comparability of CVA capital requirements. They included the following improvements to the existing approaches:

• a more comprehensive treatment of CVA risks and a better recognition of CVA hedges;

• closer alignment with industry CVA practices for accounting purposes;

• new methodologies, which have less reliance on modelling; and

• alignment with the new market risk framework methodology in the case of SA-CVA.