The rule in plain words
CVA Capital requirements are expected to be populated when the Alternative Approach is marked as 'Yes'
In Credit valuation adjustment: CVA exposures by approach - Capital requirements and exposure values (CVA) (OF25.01.01.03): if "Alternative approach" in column "Methodologies used by the firm (Yes/No)" (row 0040, column 0010) in Credit valuation adjustment: CVA exposures by approach - Authorisations (CVA) (OF25.01.01.01) is true, "All exposures subject to CVA capital requirements" in column "CVA capital requirements" (row 0010, column 0030) must equal "of which, using the alternative approach" in column "CVA capital requirements" (row 0050, column 0030).
What to do if your return fails it
- 01Open the tables below and find the cells the rule reads.
- 02The check applies only when its first part holds in your return. When it does, the second part must hold too: fix the second part, or correct the first.
- 03The Bank of England allows a small rounding difference, worked out from the decimals each value is reported with.
- 04It runs only when your filing indicators mark OF25.01.01.01 and OF25.01.01.03 as reported.
- 05This is a blocking check. A return that fails it is normally rejected, so fix it before you submit.
The cells it reads
Credit valuation adjustment: CVA exposures by approach - Authorisations (CVA) (OF25.01.01.01)
Row
- R0040Alternative approach
Column
- C0010Methodologies used by the firm (Yes/No):
Credit valuation adjustment: CVA exposures by approach - Capital requirements and exposure values (CVA) (OF25.01.01.03)
Rows
- R0010All exposures subject to CVA capital requirements
- R0050of which, using the alternative approach
Column
- C0030CVA capital requirements
Which returns it applies to
Line4 Check runs it on the own funds (PRA001) return on Bank of England banking taxonomy 4.1.1. The Bank of England applies it to own funds (PRA001) returns, as a blocking check.
The Bank’s own words and formula
The first paragraph of the plain words above is the Bank of England’s own, word for word, from its list of validations. The second spells out its formula, with each cell named from its templates.
Show the formulaShowHide
The Bank of England's formula. Cells are written as {t: table, r: row, c: column}.
if {t: OF25.01.01.01, r: 0040, c: 0010} = true() then {t: OF25.01.01.03, r: 0010, c: 0030} = {t: OF25.01.01.03, r: 0050, c: 0030} else true()Other rules on Credit valuation adjustment: CVA exposures by approach - Capital requirements and exposure values (CVA) (OF25.01.01.03)
- Total CVA capital requirements must be equal to the sum of capital requirements across the CVA methodologies used (boe_b0270)Blocking
- Total CVA Capital requirements for SFTs represent the sum of SFTs capital requirements under each CVA modelling approach (boe_b0203)Blocking
- SFTs CVA Capital requirements are calculated as 8% * SFT RWAs (boe_b0201)
- SFTs Capital requirements under the SA-CVA approach represent 8% of SA-CVA RWAs subject to SFTs and must be greater than or equal to zero (boe_b0201_2)
- SFTs Capital Requirements under the Full-BA-CVA method represent 8% of CVA RWAs and must be greater than or equal to zero (boe_b0201_3)
- BA-CVA Capital requirements for SFTs represent 8% of RWAs under SFTs, and must be positive values or zero (boe_b0201_4)
- CVA Capital Requirements must be populated. Only positive values or zero are allowed (boe_b0201_7)
- Total CVA RWAs for SFTs represent the sum of RWAs for SFTs calculated under each CVA approach (boe_b0200)Blocking
Every PRA banking rule on OF25.01.01.03
Checks like this one, run at the point of submission, are the first step to real-time supervision. Line4 builds SupTech software for financial regulators that runs checks like these as each return arrives.