Final Draft Technical Standards On The Exclusion Of Transactions With Non-EU Non-Financial Counterparties From Credit Valuation Adjustment Risk

Author:Shearman & Sterling LLP
Profession:Shearman & Sterling LLP

On February 9, 2017, the European Banking Authority published final draft Regulatory Technical Standards on the procedures for excluding transactions with non-financial counterparties established in a third country (which do not hold positions over the clearing threshold, or so called NFC-s) from the own funds requirement for credit valuation adjustment risk. The final draft RTS will supplement the requirements of the Capital Requirements Regulation. The EBA consulted on proposed draft RTS in August 2015. Firms' transactions with any NFC- will be excluded from the own funds requirements for CVA risk under the CRR, whether or not the NFC- is established in the EU. As NFC-s established in non-EU countries are not subject directly to EU regulation, the final draft RTS clarify that firms are responsible for: (i) taking the necessary steps to identify all NFC-s under this exemption and calculating accordingly their own funds requirements for CVA risk; (ii) ensuring that exempt counterparties established outside the EU would qualify as NFC-s if they were established in the EU; and (iii) ensuring that counterparties calculate the clearing threshold...

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