Basel Committee on Banking Supervision

Basel Framework

The Basel Framework is the full set of standards of the Basel Committee on Banking Supervision (BCBS), which is the primary global standard setter for the prudential regulation of banks. The membership of the BCBS has agreed to fully implement these standards and apply them to the internationally active banks in their jurisdictions. The background page describes the framework's structure and how to navigate it.

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Disclosure requirements
DIS51

Credit valuation adjustment risk

This chapter describes disclosure requirements for CVA risk.

  • Effective as of: 01 Jan 2027
  • Last update: 08 Nov 2023
  • Status Forthcoming
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Introduction

51.1

The disclosure requirements under this section are:

General information about CVA risk:

  1. Table CVAA - General qualitative disclosure requirements related to CVA
  2. Template CVA1 - The reduced basic approach for CVA (BA-CVA)
  3. Template CVA2 - The full basic approach for CVA (BA-CVA)
  4. Table CVAB - Qualitative disclosures for banks using the SA-CVA
  5. Template CVA3 - The standardised approach for CVA (SA-CVA)
  6. Template CVA4 - RWA flow statements of CVA risk exposures under SA-CVA

CVA risk under the basic approach (BA-CVA):

CVA risk under the standardised approach (SA-CVA):

Table CVAA: General qualitative disclosure requirements related to CVA

TABLE.1

Purpose: To provide a description of the risk management objectives and policies for CVA risk.

Scope of application: The table is mandatory for all banks that are subject to CVA capital requirements, including banks which are qualified and have elected to set its capital requirement for CVA at 100% of its counterparty credit risk charge.

Content: Qualitative information.

Frequency: Annual.

Format: Flexible.

Banks must describe their risk management objectives and policies for CVA risk as follows:

(a)

An explanation and/or a description of the bank's processes implemented to identify, measure, monitor and control the bank's CVA risks, including policies for hedging CVA risk and the processes for monitoring the continuing effectiveness of hedges.

(b)

Whether the bank is eligible and has chosen to set its capital requirement for CVA at 100% of the bank's capital requirement for counterparty credit risk as applicable under MAR40.
   

Template CVA1: The reduced basic approach for CVA (BA-CVA)

TABLE.2

Purpose: To provide the components used for the computation of capital requirements under the reduced BA-CVA for CVA risk.

Scope of application: The template is mandatory for banks having part or all of their capital requirements for CVA risk measured according to the reduced BA-CVA. The template should be completed with only the amounts obtained from the netting sets which are under the reduced BA-CVA.

Content: Capital requirements.

Frequency: Semiannual.

Format: Fixed.

Accompanying narrative: Banks must describe the types of hedge they use even if they are not taken into account under the reduced BA-CVA.
 

a

b

　

Components

Capital requirements under BA-CVA

1

Aggregation of systematic components of CVA risk

    

2

Aggregation of idiosyncratic components of CVA risk

    

3

Total

   

Definitions and instructions

Row

number

Explanation

1

Aggregation of systematic components of CVA risk: Capital requirements under perfect correlation assumption (∑cSCVAc) as per MAR50.14.

2

Aggregation of idiosyncratic components of CVA risk: Capital requirements under zero correlation assumption (sqrt(∑cSCVAc2)) as per MAR50.14.

3

Total: DSBA-CVA x Kreduced as per MAR50.14.

Linkages across templates

[CVA1:3/b] is equal to [OV1:10/c] if the bank only uses the reduced BA-CVA for all CVA risk exposures.
         

Template CVA2: The full basic approach for CVA (BA-CVA)

TABLE.3

Purpose: To provide the components used for the computation of capital requirements under the full BA-CVA for CVA risk.

Scope of application: The template is mandatory for banks having part or all of their capital requirements for CVA risk measured according to the full version of the BA-CVA. The template should be fulfilled with only the amounts obtained from the netting sets which are under the full BA-CVA.

Content: Capital requirements.

Frequency: Semiannual.

Format: Fixed. Additional rows can be inserted for the breakdown of other risks.

 

a

　

Capital requirements under BA-CVA

1

K Reduced

  

2

K Hedged

  

3

Total

  

Definitions and instructions

Row

number

Explanation

1

K Reduced: DSBA-CVA x Kreduced as per MAR50.14.

2

K Hedged: DSBA-CVA x Khedged as per MAR50.21.

3

Total: DSBA-CVA x Kfull as per MAR50.20.

Linkages across templates

[CVA2:3/a] is equal to [OV1:10/c] if the bank only uses the full BA-CVA for all CVA risk exposures.
       

Table CVAB: Qualitative disclosures for banks using the SA-CVA

TABLE.4

Purpose: To provide the main characteristics of the bank's CVA risk management framework.

Scope of application: The table is mandatory for all banks using the SA-CVA to calculate their capital requirements for CVA risk.

Content: Qualitative information.

Frequency: Annual.

Format: Flexible.

Banks must provide the following information on their CVA risk management framework:

  

(a)

A description of the bank's CVA risk management framework.

  

(b)

A description of how senior management is involved in the CVA risk management framework.

  

(c)

An overview of the governance of the CVA risk management framework (eg documentation, independent control unit, independent review, independence of the data acquisition from the lines of business).

  
     

Template CVA3: The standardised approach for CVA (SA-CVA)

TABLE.5

Purpose: To provide the components used for the computation of capital requirements under the SA-CVA for CVA risk.

Scope of application: The template is mandatory for banks having part or all of their capital requirements for CVA risk measured according to the SA-CVA.

Content: Capital requirements.

Frequency: Semiannual.

Format: Fixed. Additional rows can be inserted for the breakdown of other risks.

 

a

b

　

Capital requirements under SA-CVA

Number of counterparties

1

Interest rate risk

   

2

Foreign exchange risk

   

3

Reference credit spread risk

    

4

Equity risk

   

5

Commodity risk

    

6

Counterparty credit spread risk

    

7

Total (sum of rows 1 to 6)

    

Linkages across templates

[CVA3:7/a] is equal to [OV1:10/a] if the bank only uses the SA-CVA for all CVA risk exposures.
       

Template CVA4: RWA flow statements of CVA risk exposures under SA-CVA

TABLE.6

Purpose: Flow statement explaining variations in RWA for CVA risk determined under the SA-CVA.

Scope of application: The template is mandatory for banks using the SA-CVA.

Content: RWA for CVA risk. Changes in RWA amounts over the reporting period for each of the key drivers should be based on a bank's reasonable estimation of the figure.

Frequency: Quarterly.

Format: Fixed.

Accompanying narrative: Banks are expected to supplement the template with a narrative commentary to explain any significant changes over the reporting period and the key drivers of such changes. Factors behind changes could include movements in risk levels, scope changes (eg movement of netting sets between SA-CVA and BA-CVA), acquisition and disposal of business/product lines or entities or foreign currency translation movements.
 

a

  

1

Total RWA for CVA at previous quarter-end

  

2

Total RWA for CVA at end of reporting period

  

Linkages across templates

[CVA4:1/a] is equal to [OV1:10/b]

[CVA4:2/a] is equal to [OV1:10/a]
       

Background to the Basel Framework

The Basel Framework is a consolidated version of the full set of standards of the Basel Committee on Banking Supervision (BCBS), which is the primary global standard setter for the prudential regulation of banks. The membership of the BCBS has agreed to fully implement these standards and apply them to the internationally active banks in their jurisdictions.

Structure

The framework comprises the 14 standards listed below. Each standard is divided into chapters, and many chapters have multiple versions, eg a chapter may have a version that is applicable now and one that will become applicable after the Basel III reforms have been implemented. The full breakdown of all chapters and versions is available here.

If you would like to explore the source material for the consolidated Basel Framework, there is a mapping table that links each of the paragraphs of the BCBS's original published standards to their locations within the first published version the framework.

Other features of the framework include:

  • Interactive cross-references to make it easier to navigate.
  • A "time traveller" feature, which lets you select a future date and see the framework as it is due to apply at that date.
  • Answers to frequently asked questions displayed directly underneath the paragraphs to which they relate.
  • A section to view all past and future planned changes to the Basel Framework.
  • An improved search function, which makes it easier to find specific content in each standard.

If you have any questions or suggestions regarding the consolidated Basel Framework, please let us know at baselcommittee@bis.org.

This standard describes the scope of application of the Basel Framework.

This standard describes the criteria that bank capital instruments must meet to be eligible to satisfy the Basel capital requirements, as well as necessary regulatory adjustments and transitional arrangements.

This standard describes the framework for risk-based capital requirements.

This standard describes how to calculate capital requirements for credit risk.

This standard describes how to calculate capital requirements for market risk and credit valuation adjustment risk.

This standard describes how to calculate capital requirements for operational risk.

This standard describes the simple, transparent, non-risk-based leverage ratio. This measure intends to restrict the build-up of leverage in the banking sector and reinforce the risk-based requirements with a simple, non-risk-based "backstop" measure.

This standard describes the Liquidity Coverage Ratio, a measure which promotes the short-term resilience of a bank's liquidity risk profile.

The net stable funding ratio requires banks to maintain a stable funding profile in relation to the composition of their assets and off-balance-sheet activities.

Large exposures regulation limits the maximum loss that a bank could face in the event of a sudden counterparty failure to a level that does not endanger the bank's solvency. This standard requires banks to measure their exposures to a single counterparty or a group of connected counterparties and limit the size of large exposures in relation to their capital.

This standard establishes minimum standards for margin requirements for non-centrally cleared derivatives. Such requirements reduce systemic risk with respect to non-standardised derivatives by reducing contagion and spillover risks and promoting central clearing.

The Pillar 2 supervisory review process ensures that banks have adequate capital and liquidity to support all the risks in their business, especially with respect to risks not fully captured by the Pillar 1 process, and encourages good risk management.

This standard sets out disclosure requirements, which aim to encourage market discipline.

The Basel Core Principles provide a comprehensive standard for establishing a sound foundation for the regulation, supervision, governance and risk management of the banking sector.

The Basel Framework homepage lists all 14 standards together with a short description of their content. The "effective as of" date is the date by which the members of the BCBS have agreed to implement the standards. By default, this date is set to the launch date of the consolidated framework for standards that were already in force at the launch of the framework. For standards that have chapters that are due to change in the future, a "next version" date is shown.

Click on the name of any standard to get the list of chapters that it contains. By default, you will see the current versions of the standards that are in effect as of the day you are using the website. In cases where new chapter versions are due to come into effect in the future, the chapter can be accessed by clicking the "new future version" link shown at the bottom of the chapter description.

00:02:27
Navigating the Basel Framework
Navigating the Basel Framework
Video 9 April 2019
Navigating the Basel Framework
This tutorial explains the features of the Basel Committee's consolidated framework, bringing global standards for bank regulation and supervision together in one place.

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