This final report presents the regulatory technical standards (RTS) on credit valuation adjustment (CVA) risk for securities financing transactions. It establishes a materiality threshold of 5% for the inclusion of fair-valued securities financing transactions in the calculation of own funds requirements for CVA risk. Institutions must assess this risk on a quarterly basis, taking into account feedback from a…
This document is the final report published in October 2025 by the European Banking Authority (EBA) on the draft regulatory technical standards (RTS) concerning the credit valuation adjustment (CVA) risk of securities financing transactions (SFTs). It is part of Regulation (EU) No 575/2013 (CRR), amended by CRR3, and aims to define the criteria and conditions to assess the materiality of CVA risk exposures related to SFTs measured at fair value. The scope covers European financial institutions subject to these requirements, with a regulatory deadline set for 10 July 2026 for the submission of the RTS to the European Commission. The report comprises 23 pages and mainly addresses quantitative aspects of the CVA risk assessment of SFTs, as well as feedback from a three-month public consultation.
- Subject: The final report presents the draft regulatory technical standards (RTS) developed by the EBA to define the conditions and criteria for assessing the materiality of CVA risk of SFTs measured at fair value, in accordance with Article 382(6) of the CRR.
- Importance: Considering the CVA risk of SFTs in capital requirements is crucial to ensure adequate coverage of counterparty risks, while guaranteeing a harmonized and proportionate approach within the European Union.
- Main findings: The report proposes a quantitative approach based on a ratio expressing the increase in CVA capital requirements when SFTs measured at fair value are included. This ratio compares CVA capital requirements with and without these SFTs. A materiality threshold is set at 5%: if the ratio is equal or above, SFTs are considered materially exposed to CVA risk and must be included in the calculation of capital requirements. The assessment must be performed quarterly, consistent with regulatory reporting cycles.
- Conclusions: The chosen quantitative approach ensures objectivity, comparability and fairness among institutions, avoiding divergent interpretations linked to qualitative criteria. The 5% threshold was validated after impact analysis based on Basel III monitoring data, showing that 8% of institutions would be concerned.
- Recommendations: The RTS will be submitted to the European Commission for adoption, then to the European Parliament and the Council for validation. Institutions must apply the quarterly assessment and integrate SFTs into the CVA requirements scope as soon as materiality is established, without a stabilization mechanism delaying this inclusion.
- CRR3 introduced a revision of the European capital requirements framework for CVA risk, explicitly including SFTs measured at fair value when their CVA exposure is materially significant.
- Article 382(6) of the CRR mandates the EBA to define the criteria and frequency for assessing this materiality.
- The objective is to establish a common, objective and quantitative method allowing institutions to identify if their CVA exposures related to SFTs justify inclusion in the calculation of capital requirements.
- The scope excludes SFTs benefiting from exemptions provided in Articles 382(3) and (4) of the CRR, unless the institution voluntarily chooses to include them.
- The assessment frequency is set quarterly to align this process with COREP reporting cycles.
- Limitations notably concern the exclusion of exempted SFTs and the non-application of the RTS to institutions using certain alternative CVA risk calculation methods.
Quantitative approach to materiality:
- Materiality is assessed via a ratio: (a - b) / b, where a represents CVA capital requirements including SFTs measured at fair value, and b those excluding these SFTs (p. 8).
- A 5% threshold is set as the materiality threshold. If the ratio is equal or above, SFTs are included in the CVA requirements scope (p. 4, 8).
- This method ensures an objective and homogeneous measure among institutions, avoiding interpretation divergences linked to qualitative criteria (p. 10).
Assessment frequency:
- The assessment must be performed quarterly, at the end of March, June, September and December (p. 8).
- This periodicity is consistent with institutions' COREP calculation and reporting obligations (p. 5, 8).
Impact analysis and option choices:
- Three options for the materiality approach were considered: qualitative, quantitative and mixed. The quantitative was chosen for its objectivity and relative simplicity (p. 10).
- Three options for the metric: exposure values, capital requirements for counterparty credit risk, capital requirements for CVA risk. The last was chosen as it precisely corresponds to the risk assessed (p. 11).
- Two options for the ratio: ratio between CVA requirements of SFTs and total CVA requirements, or ratio between CVA requirements of SFTs and total requirements. The first option was retained for its relevance (p. 11).
- Two options for frequency: monthly or quarterly. Quarterly frequency was chosen to limit operational burden (p. 12).
Impact on institutions:
- Out of a sample of 159 Basel III monitoring institutions, 13 (8%) exceed the 5% threshold and would thus be concerned by the inclusion of SFTs in CVA calculation (p. 12-13).
Public consultation and feedback:
- Six responses received, with requests for alignment with US and UK approaches, which differ significantly (p. 14).
- Some stakeholders requested a qualitative or mixed approach, or a higher threshold (10%) (p. 14-15).
- The EBA maintained the quantitative approach and the 5% threshold, after adjusting the ratio formula to account for the non-linearity of SA-CVA and BA-CVA methods (p. 15, 19).
- The initially proposed stabilization mechanism (considering the last 4 quarters) was removed, for an assessment at point T only, to avoid unjustified capital retention (p. 15, 21).
- Requirements related to collateral and CVA hedges are aligned with existing CRR methods (p. 22-23).
- Institutions using the simplified method (Article 385 CRR) are also concerned by the materiality assessment (p. 23).
- Established facts:
- The European regulatory framework requires including SFTs measured at fair value in the calculation of CVA capital requirements if their exposure is materially significant (p. 1-2).
- A quantitative approach based on a ratio of increase in CVA requirements was developed and validated (p. 3-5).
- The materiality threshold was set at 5%, validated by an impact analysis on a sample of 159 institutions (p. 12-13).
- The assessment frequency is quarterly, aligned with COREP cycles (p. 5, 8).
- Assumptions:
- Using CVA capital requirements as the metric faithfully reflects the CVA risk of SFTs (p. 11).
- Excluding SFTs benefiting from regulatory exemptions complies with the CRR framework (p. 5).
- Author's interpretations:
- The quantitative approach guarantees a level playing field and reduces supervisory burden compared to a qualitative approach (p. 10, 15).
- Maintaining an assessment at point T (and not over multiple quarters) ensures capitalization proportionate to current risk (p. 15, 21).
- Uncertainties:
- Competitive impact vis-à-vis US and UK approaches remains a concern for some stakeholders (p. 14-15).
- The non-linearity of SA-CVA and BA-CVA formulas may complicate precise impact measurement (p. 19).
- Variability in accounting practices on fair value could influence calculations, but the regulatory approach aims to limit this effect (p. 16).
- The EBA recommends adopting the RTS defining a quantitative method based on a ratio of increase in CVA capital requirements to assess the materiality of CVA exposures related to SFTs measured at fair value.
- The materiality threshold is set at 5%, with quarterly assessment at the end of March, June, September and December.
- Institutions must include SFTs in the CVA requirements scope as soon as the threshold is reached, without a stabilization mechanism delaying this inclusion.
- The RTS will be submitted to the European Commission for adoption, then to the European Parliament and the Council for validation, before publication in the Official Journal of the European Union.
- The chosen approach ensures harmonization within the EU, better comparability of requirements among institutions, and proportionate management of CVA risk of SFTs.
- The EBA emphasizes that institutions already have the necessary calculations for COREP reporting, thus facilitating RTS implementation.
- No postponement of the application date is planned; implementation must occur promptly after adoption to ensure regulatory compliance.
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