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Articles 384, 385 and 386 are replaced by the following: ‘Article 384 Basic approach 1. An institution shall calculate the own funds requirements for CVA risk in accordance with paragraph 2 or 3 of this Article, as applicable, for a portfolio of transactions with one or more counterparties by using one of the following formulae, as appropriate: The approaches set out in the first subparagraph, points (a) and (b), shall not be used in combination. 2. An institution that meets the condition referred to in paragraph 1, point (a), shall calculate the own funds requirements for CVA risk as follows: BACVAtotal = β ∙ BACVAcsr–unhedged + DSCVA ∙ (1 – β) ∙ BACVAcsr–hedged where: where: Where there are no external ratings for a specific counterparty, institutions may, subject to approval by the competent authorities, map the internal rating to a corresponding external rating and assign a risk weight corresponding to either credit quality step 1 to 3 or credit quality step 4 to 6; otherwise, the risk weights for unrated exposures shall be applied. = the effective maturity for the netting set NS with counterparty c; shall be calculated in accordance with Article 162; however, for that calculation, shall not be capped at five years, but at the longest contractual remaining maturity in the netting set; For an institution, using the methods set out in Title II, Chapter 6, Section 6, the supervisory discount factor shall be set at 1; in all other cases, the supervisory discount factor shall be calculated as follows: Table 1 Table 2 3. An institution that meets the condition referred to in paragraph 1, point (b), shall calculate the own funds requirements for CVA risk as follows: where all of the terms are the ones set out in paragraph 2. Article 385 Simplified approach 1. An institution that meets all of the conditions set out in Article 273a(2) or has been permitted by its competent authority in accordance with Article 273a(4) to apply the approach set out in Article 282, may calculate the own funds requirements for CVA risk as the risk-weighted exposure amounts for counterparty risk for non-trading book and trading book positions, respectively, referred to in Article 92(4), points (a) and (g), divided by 12,5. 2. For the purposes of the calculation referred to in paragraph 1, the following requirements shall apply: 3. An institution that no longer meets one or more of the conditions set out in Article 273a(2) or (4), as applicable, shall comply with the requirements set out in Article 273b. Article 386 Eligible hedges 1. Positions in hedging instruments shall be recognised as eligible hedges for the calculation of the own funds requirements for CVA risk in accordance with Articles 383 and 384 where those positions meet all of the following requirements: For the purpose of calculating the own funds requirements for CVA risk in accordance with Article 383, positions in hedging instruments shall be recognised as eligible hedges where, in addition to the conditions set out in points (a) to (c) of this paragraph, such hedging instruments form a single position in an eligible hedge and are not split into more than one position in more than one eligible hedge. 2. For the calculation of the own funds requirements for CVA risk in accordance with Article 383, only positions in the following hedging instruments shall be recognised as eligible hedges: 3. For the calculation of the own funds requirements for CVA risk in accordance with Article 384, only positions in the following hedging instruments shall be recognised as eligible hedges: 4. Positions in hedging instruments entered into with third parties that are recognised as eligible hedges in accordance with paragraphs 1, 2 and 3 and included in the calculation of the own funds requirements for CVA risk shall not be subject to the own funds requirements for market risk set out in Title IV. 5. Positions in hedging instruments that are not recognised as eligible hedges in accordance with this Article shall be subject to the own funds requirements for market risk set out in Title IV.’ ; the formula set out in paragraph 2 of this Article, where the institution includes in the calculation one or more eligible hedges recognised in accordance with Article 386; the formula set out in paragraph 3 of this Article, where the institution does not include in the calculation any eligible hedges recognised in accordance with Article 386. BACVAtotal | = the own funds requirements for CVA risk under the basic approach; BACVAcsr–unhedged | = the own funds requirements for CVA risk under the basic approach as calculated in accordance with paragraph 3 for an institution that meets the condition set out in paragraph 1, point (b); DSCVA | = 0,65; β | = 0,25; α | = 1,4; ρ | = 0,5; c | = the index that denotes all counterparties for which the institution calculates the own funds requirements for CVA risk using the approach laid down in this Article; NS | = the index that denotes all netting sets with a given counterparty for which the institution calculates the own funds requirements for CVA risk using the approach laid down in this Article; h | = the index that denotes all single-name instruments recognised as eligible hedges in accordance with Article 386 for a given counterparty for which the institution calculates the own funds requirements for CVA risk using the approach laid down in this Article; I | = the index that denotes all index instruments recognised as eligible hedges in accordance with Article 386 for all counterparties for which the institution calculates the own funds requirements for CVA risk using the approach laid down in this Article; RWc | = the risk weight applicable to counterparty c; counterparty c shall be mapped to one of the risk weights based on a combination of sector and credit quality and determined in accordance with Table 1. | = the counterparty credit risk exposure value of the netting set NS with counterparty c, including the effect of collateral in accordance with the methods set out in Title II, Chapter 6, Sections 3 to 6, as applicable to the calculation of the own funds requirements for counterparty credit risk referred to in Article 92(4), points (a) and (g); | = the supervisory discount factor for the netting set NS with counterparty c. rhc | = the supervisory correlation factor between the credit spread risk of counterparty c and the credit spread risk of a single-name instrument recognised as an eligible hedge h for counterparty c, determined in accordance with Table 2; | = the residual maturity of a single-name instrument recognised as an eligible hedge; | = the notional of a single name instrument recognised as an eligible hedge; | = the supervisory discount factor for a single name instrument recognised as an eligible hedge, calculated as follows: | = the supervisory risk weight of a single-name instrument recognised as an eligible hedge; those risk weights shall be based on a combination of sector and credit quality of the reference credit spread of the hedging instrument and determined in accordance with Table 1; | = the residual maturity of one or more positions in the same index instrument recognised as an eligible hedge; in the case of more than one position in the same index instrument, shall be the notional-weighted maturity of all those positions; | = the full notional of one or more positions in the same index instrument recognised as an eligible hedge; | = the supervisory discount factor for one or more positions in the same index instrument recognised as an eligible hedge, calculated as follows: | = the supervisory risk weight of an index instrument recognised as an eligible hedge; shall be based on a combination of sector and credit quality of all index constituents, calculated as follows: (a) where all index constituents belong to the same sector and have the same credit quality, as determined in accordance with Table 1, shall be calculated as the relevant risk weight of Table 1 for that sector and credit quality multiplied by 0,7; (b) where all index constituents do not belong to the same sector or do not have the same credit quality, shall be calculated as a weighted average of the risk weights of all index constituents, as determined in accordance with Table 1, multiplied by 0,7; Sector of counterparty | Credit quality Credit quality step 1 to 3 | Credit quality step 4 to 6 and not rated Central government, including central banks, multilateral development banks and international organisations referred to in Article 117(2) or Article 118 | 0,5 % | 2,0 % Regional government or local authority and public sector entities | 1,0 % | 4,0 % Financial sector entities, including credit institutions incorporated or established by a central government, a regional government or a local authority, and promotional lenders | 5,0 % | 12,0 % Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying | 3,0 % | 7,0 % Consumer goods and services, transportation and storage, administrative and support service activities | 3,0 % | 8,5 % Technology, telecommunications | 2,0 % | 5,5 % Health care, utilities, professional and technical activities | 1,5 % | 5,0 % Other sector | 5,0 % | 12,0 % Correlations between credit spread of counterparty and single-name hedge Single-name hedge h of counterparty i | Value of rhc Counterparties referred to in Article 386(3), point (a)(i) | 100 % Counterparties referred to in Article 386(3), point (a)(ii) | 80 % Counterparties referred to in Article 386(3), point (a)(iii) | 50 % only transactions subject to the own funds requirements for CVA risk laid down in Article 382 are subject to that calculation; credit derivatives that are recognised as internal hedges against counterparty risk exposures are not included in that calculation. they are used for the purpose of mitigating CVA risk and are managed as such; they can be entered into with third parties or with the institution’s trading book as an internal hedge, in which case they are to comply with Article 106(7); only positions in hedging instruments as referred to in paragraphs 2 and 3 of this Article can be recognised as eligible hedges for the calculation of the own funds requirements for CVA risk in accordance with Articles 383 and 384, respectively. instruments that hedge variability of the counterparty credit spread, with the exception of instruments referred to in Article 325(5); instruments that hedge variability of the exposure component of CVA risk, with the exception of the instruments referred to in Article 325(5). single-name credit default swaps and single-name contingent-credit default swaps, referencing: the counterparty directly; an entity legally related to the counterparty, where legally related refers to cases where the reference name and the counterparty are either a parent undertaking and its subsidiary or two subsidiaries of a common parent; an entity that belongs to the same sector and region as the counterparty; index credit default swaps.

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Source: EUR-Lex CELLAR · retrieved 2026-09-04 · Text as adopted (Official Journal); later amendments are not incorporated in this text.