FRM Part II · FRM Exam Part II · High-level Summary of Basel III Reforms
Which exposure is generally excluded from the Basel III CVA capital requirement?
Securities financing transactions are generally outside the CVA charge unless the supervisor judges the bank's fair-valued CVA loss exposure on them to be material. Uncleared OTC derivatives with corporates, hedge funds or foreign banks remain in scope for CVA capital.
- ASecurities financing transactions, unless supervisors judge the bank's fair-valued SFT CVA exposures to be materialCorrect
- BAll uncleared OTC derivatives with corporates
- CUncleared OTC derivatives with hedge funds
- DDerivatives with banks in other jurisdictions
Explanation
Transactions with qualifying central counterparties are excluded, and SFTs are included only if the supervisor deems fair-value CVA loss exposures material. Uncleared OTC derivatives with corporates, hedge funds, or foreign banks remain in scope.
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