Regulatory Alerts2021-05-12
Added · Updated
Completion Instructions for Form MA(BS)3(IIIf): Risk-weighted Amount for CVA
Authorized institutions incorporated in Hong Kong must complete Form MA(BS)3(IIIf) to report Counterparty Credit Risk (CVA) capital charges calculated under the advanced or standardized CVA methods. Reporting AIs eligible for the advanced method complete Division A using Value at Risk and stressed Value at Risk metrics with a minimum multiplication factor of 3, while all other institutions complete Division B using the standardized method based on default risk exposures and eligible hedges. The instructions specify that recognized collateral may be used to mitigate credit risk for certain netting sets and prohibit including ineligible CVA hedges in capital charge calculations. Institutions must ensure expected exposures are not double-counted for mitigation effects and must apply specific formulas involving a multiplier of 12.5 to derive the final risk-weighted amount.
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