On 1 October the Basel Committee published a report on the regulatory consistency of risk-weighted assets (RWAs) for counterparty credit risk.
The report presents the findings from a hypothetical test portfolio exercise to examine variability in banks' modelling of derivatives, and specifically in exposure modelling. The report focuses on the internal models method and the advanced credit valuation adjustments (CVA) risk capital charge for over-the-counter (OTC) derivative trades.
The report presents the key findings and lists a number of observed good practices. The report also highlights areas where banks and supervisors may seek to harmonise practices to reduce variability in outcomes. Additionally, based on the results of this study, the Basel Committee is considering whether it is necessary to narrow down certain modelling choices for banks and/or harmonise supervisory practices to enhance consistency in outcomes.