4.42 In CP16/22, the PRA set out its considerations related to the aggregate capital requirements for derivatives from SA-CCR and the Basel 3.1 standards' CVA risk framework. It noted areas where data suggested the calibration was overly conservative and proposed to address that by:

• reducing the SA-CCR alpha factor from 1.4 to 1 for exposures to pension funds and NFCs; and

• introducing a separate risk category and risk weight for pension funds in the CVA framework. The new risk weight would represent an approximately 30% reduction compared to the Basel 3.1 standards.

4.43 Respondents supported the PRA's proposed treatment of pension funds in the CVA framework. Responses focused on arguments for additional reductions in the calibration of the SA-CCR framework. In particular, five respondents suggested that the SA-CCR alpha factor should be reduced to 1 for all counterparties.

4.44 The PRA has considered the responses and decided to retain the proposed alpha factor reduction for NFCs and pension funds only. As stated in CP16/22, the PRA's proposals were informed by a data collection exercise that identified specific groups of transactions where a deviation from international standards was appropriate due to SA-CCR being over-calibrated relative to the IMM. Respondents did not provide persuasive evidence that other types of transactions had a similar over-calibration.

PRA objectives and 'have regards' analysis