The rule in plain words
For SA-CVA approach: notional of CVA hedges cannot be negative.
EBA checks it for four rows: CVA hedges of exempted transactions not included in scope of CVA, single name CDS, index CDS and other derivatives classified as CVA risk hedges. That makes four checks. A failure names the one that failed.
How the Line4 Check report words itShowHide
The first of its checks, word for word as the report shows it when it fails. The others read the same, with their own column, row or sheet.
Notional of CVA hedges: Single name CDS >= 0
What to do if your filing fails it
- 01Open the template below and find the cells the rule reads.
- 02Look for a value with the wrong sign in these cells, such as an amount entered as a negative number.
- 03EBA compares the values exactly here: there is no rounding tolerance.
- 04It runs only when your filing indicators mark C 25.01 as reported.
- 05This is a warning. It does not stop the filing on its own, but your authority may ask you to explain it.
The cells it reads
Credit valuation adjustment risk (CVA) (C 25.01.a)
Rows
- 0120CVA hedges of exempted transactions not included in scope of CVA
- 0140Single name CDS
- 0150Index CDS
- 0160Other derivatives classified as CVA risk hedges
Column
- 0120Notional of CVA hedges
A worked example
The first of its checks, with simple numbers.
Single name CDS, notional of CVA hedges must then be at least 0.
A file that reports 0 passes. One that reports -100 fails, by 100.
The numbers are illustrative.
Show the rule as writtenShowHide
EBA's formula, as written out for the first of its checks. Cells are written as {template, row, column, sheet}.
{C_25.01.a,r0140,c0120,} >= 0The next three:
{C_25.01.a,r0120,c0120,} >= 0{C_25.01.a,r0160,c0120,} >= 0{C_25.01.a,r0150,c0120,} >= 0Other rules on C 25.01.a
- Transactions in scope of the own funds requirement for CVA risk cannot be negative (v23232_s)Warning
- Full BA-CVA approach: notional of CVA hedges cannot be negative (v23347_s)Warning
- Number of counterparties cannot be negative (v23348_s)Warning
- All transactions exempted cannot be less than transactions with sovereign counterparties (v23073_m)Warning
- All transactions exempted cannot be less than transactions with pension funds counterparties (v23072_m)Warning
- All transactions exempted cannot be less than intragroup transactions (v23071_m)Warning
- All transactions exempted cannot be less than transactions with non-financial counterparties (v23070_m)Warning
- All transactions exempted cannot be less than clients transactions (v23069_m)Warning
Every COREP own funds rule, by template
Checks like this one, run at the point of submission, are the first step to real-time supervision.