Regulatory Consistency Assessment Programme (RCAP) - report on risk-weighted assets for counterparty credit risk (CCR)

October 2015

This report presents the findings from a hypothetical test portfolio exercise to examine variability in banks' modelling of derivatives, and specifically in exposure modelling. The report focuses on the internal models method (IMM) and the advanced credit valuation adjustments (CVA) risk capital charge for over-the-counter (OTC) derivative trades. The study is a part of the Basel Committee's Regulatory Consistency Assessment Programme (RCAP), which is intended to ensure consistent implementation of the Basel framework. This exercise completes the Committee's review of trading-related internal models and follows two earlier exercises that focused on market risk RWAs.

The report analyses the variability of risk-weighted assets outcomes, highlights good practices and identifies areas where additional attention from banks and supervisors is required to mitigate unwarranted RWA variability. In this regard, an important aim of the report is to support implementation and supervision of CCR models.

The results show considerable variability in the outcomes of CCR models, which is typically higher for CVA models than for IMM models. Overall, the level of variability is similar to the variability of other market risk model outcomes observed in previous exercises. Key drivers for the variability include differences in banks' modelling choices, as well as differences in supervisory practices.