Document ID: chunk:federal_register_of_legislation:F2023L01599:front:0:p10
Version: federal_register_of_legislation:F2023L01599
Segment Type: other
Provision Reference: 
Character Range: 24683–27439

capital required for its risk-weighted credit exposure for counterparty credit default risk.
16.         An ADI must calculate its CVA risk capital charge, KCVA, according to one of the three following formulae:
(a)          an ADI that has OTC derivative exposure to only one counterparty must calculate its CVA risk capital charge as:
       where:
       w = the weight applicable to the counterparty determined according to paragraph 17 of this Attachment;
       M = the weighted average maturity in years (weighted by notional amount) of all OTC derivative transactions with the counterparty, determined according to paragraphs 40 to 46 of Attachment B of APS 113, except that M is not capped at five years;
       ; and[9]
       For an IRB ADI, Exposuretotal = the EAD for the counterparty under SA-CCR without any adjustment for incurred CVA;
       For a standardised ADI, Exposuretotal = the counterparty-level CEA under the adjusted CEM without any adjustment for incurred CVA;
       If there is more than one netting set for the counterparty, an ADI must determine ,  and Exposuretotal separately for each netting set, and calculate the sum of M × D × Exposuretotal over all netting sets.[10] The calculation of  applies at the netting set level;
(b)          an ADI that has OTC derivative exposures to more than one counterparty, but does not allow for CVA hedges in accordance with paragraphs 18 to 20 of this Attachment, must calculate its CVA risk capital charge as:
       where the summations (subscript i) are by counterparty; and
(c)          an ADI that has OTC derivative exposures to more than one counterparty, and has in place eligible CVA hedges in accordance with paragraphs 18 to 20 of this Attachment, must calculate its CVA risk capital charge as:
where:
Mihedger = the maturity in years of the purchased single name credit default swap (CDS) hedge referencing counterparty i and used to hedge CVA risk;
Bi = the notional amount of the purchased single-name CDS hedge referencing counterparty i and used to hedge CVA risk;
wind = the weight applicable to the 'ind' CDS index determined according to paragraph 17 of this Attachment;
Mind = the maturity in years of 'ind' CDS index purchased protection;
     ; and
Bind = the notional amount of 'ind' CDS index purchased protection used to hedge CVA risk.
An ADI that has more than one purchased single-name CDS hedge referencing counterparty i used to hedge CVA risk, must replace MihedgeDihedgeBi in the formula above by the sum over all such hedges:
where each hedge is denoted by the subscript j = 1,2,3 …
An ADI that has purchased more than one CDS index protection to hedge CVA risk must replace MindDindBind in the formula above by the sum over all such hedges:

where