On August 5, 2015, the European Banking Authority published a consultation paper including draft Regulatory Technical Standards on the procedures for excluding a firm’s transactions with Non-Financial Counterparties established in non-EU countries from the own funds requirements for Credit Valuation Adjustment risk under the CRR. A firm’s transaction with a NFC is excluded from the own funds requirements for CVA risk under the CRR, whether or not the NFC is established in the EU. This is the case as long as transactions do not exceed the clearing threshold specified in the European Market Infrastructure Regulation. As NFCs established in non-EU countries are not subject directly to EU regulation, the draft RTS clarify that firms are responsible for: (i) taking the necessary steps to identify all NFCs under this exemption and calculating accordingly their own funds requirements for CVA risk; (ii) ensuring that exempt counterparties established outside the EU would qualify as NFCs if they were established in the EU; and (iii) ensuring that counterparties calculate the clearing threshold according to the relevant provisions in EMIR and do not exceed those thresholds. The draft RTS align the treatment of NFCs established in a non-EU country with the treatment of NFCs established in the EU. Comments are due by November 5, 2015.

The consultation paper is available at: http://www.eba.europa.eu/documents/10180/1155417/EBA-CP-2015- 14+%28CP+on+RTS+on+CVA+exemption%29.pdf