The rule in plain words
Under the alternative approach, total CVA RWAs must be equal to total CCR (counterparty credit risk) RWAs
In Credit valuation adjustment: CVA exposures by approach - Authorisations (CVA) (OF25.01.01.01): if "Alternative approach" in column "Methodologies used by the firm (Yes/No)" (row 0040, column 0010) is true, "of which, using the alternative approach" in column "CVA RWAs" (row 0050, column 0010) in Credit valuation adjustment: CVA exposures by approach - Capital requirements and exposure values (CVA) (OF25.01.01.03) must equal "Total" in column "Risk weighted exposure amounts" (row 0110, column 0200) on sheet "All CCR exposures" (sheet 0001) in Counterparty credit risk: CCR exposures by approach (CCR 2) (C34.02.01.01).
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 C34.02.01, 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
Counterparty credit risk: CCR exposures by approach (CCR 2) (C34.02.01.01)
Row
- R0110Total
Column
- C0200Risk weighted exposure amounts
Sheet
- S0001All CCR exposures
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)
Row
- R0050of which, using the alternative approach
Column
- C0010CVA RWAs
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: 0050, c: 0010} = {t: C34.02.01.01, r: 0110, c: 0200, z: 0001} else true()Other rules on Credit valuation adjustment: CVA exposures by approach - Authorisations (CVA) (OF25.01.01.01)
- If the full-BA-CVA methodology is used, full BA-CVA Capital Requirements must be reported (boe_b0403)Blocking
- If the Reduced BA-CVA methodology is used, the corresponding reduced-BA CVA Capital requirements must be reported (boe_b0402)Blocking
- Firms using the alternative approach must have a derivatives business size smaller than £88bn (boe_b0401)Blocking
- A firm cannot simultaneously use the reduced BA-CVA and the full BA-CVA (boe_b0400)Blocking
- Firms that use the alternative approach cannot use the BA-CVA or the SA-CVA approach (boe_b0399)Blocking
- If firms are using the SA-CVA, then they must report the associated CVA capital requirements (boe_b0553)
- Credit valuation adjustment: CVA exposures by approach - Authorisations (CVA): the total full BA-CVA requirement must be reported (boe_b0324)Blocking
- SA-CVA capital requirements must be equal to the sum of capital requirements for delta risk and capital requirements for vega risk (boe_b0271)Blocking
Every PRA banking rule on OF25.01.01.01
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.