Competent authorities have made progress in their approaches to the supervision of CVA risk

The European Banking Authority (EBA) today published a follow-up Peer Review Report on the exclusion from the credit valuation adjustment (CVA) risk of transactions with non-financial counterparties established in a third country. ​This follow-up Review found that competent authorities continue to largely assess CVA risk sufficiently, using different approaches which are fit for purpose in satisfying the regulatory requirements and the Supervisory Review and Evaluation Process (SREP) Guidelines. Furthermore, since the 2023 Report, all competent authorities have made some progress in strengthening their CVA risk assessments and addressing the follow-up measures suggested as part of that Report.

​The follow-up Peer Review focuses on the assessment of the same four EU competent authorities which were part of the 2023 Peer Review. While the follow-up review highlighted that all competent authorities have made some progress in strengthening their CVA risk assessments and addressing the follow-up measures suggested in the 2023 Report, it also found that only one competent authority has made specific efforts to review the compliance with the Exclusion Regulatory Technical Standard (RTS). Consequently, only one benchmark assessment of CVA risk assessment could be upgraded to 'fully applied', while for the other three competent authorities it has been kept as 'largely applied'.

​​Legal basis and background

​The follow-up Peer Review has been conducted in accordance with Article 34 of the EBA methodology for the conduct of peer reviews (EBA/DC/2020/327). This requires a review committee to prepare a follow report two years after the publication of the initial peer review and to submit it to the Board of Supervisors. In accordance with the methodology, the follow-up report shall include an assessment of, but not be limited to, the adequacy and effectiveness of the actions undertaken by the competent authorities that are subject to the peer review in response to the follow-up measures of the peer review report.