2020 Universal registration document and annual financial report - BNP PARIBAS 423
5risks and CaPital adequaCy Pillar 3
5
Counterparty credit risk
CVA RISK
The CVA risk measures the risk of losses caused by changes in the credit valuation adjustments resulting from credit spread changes associated with the counterparties to whom the Group is exposed (see paragraph Credit Valuation Adjustments (CVA)).
Using the standardised approach, the capital requirement for credit valuation adjustment risk (CVA) is calculated according to the supervisory formula.
Using the IRB approach, the CVA risk capital charge is the sum of two elements:
■ CVA VaR charge, which represents the own funds requirement measured from a VaR computation on CVA sensitivities to credit spreads;
■ CVA SVaR charge, which represents the own funds requirement measured from a stressed VaR computation on CVA sensitivities to credit spreads.
➤ TABLE 74: CVA RISK EXPOSURE AT DEFAULT AND RISK-WEIGHTED ASSETS (EU CCR2)
In millions of euros
31 December 2020 31 December 2019
EAD RWAs EAD RWAs
Advanced approach 35,994 2,486 37,107 2,034
CVA VaR charge 796 281
CVA SVaR charge 1,690 1,753
Standardised approach 462 324 352 260
TOTAL 36,455 2,810 37,460 2,294
COUNTERPARTY CREDIT RISK MANAGEMENT
CREDIT RISK MITIGATION TECHNIQUES In the context of liquidity management and counterparty credit risk management, the BNP Paribas Group systematically monitors the collateral guarantees received and given, for both the portion hedging the contracts market value (variation margin) and the risk of an adverse change in these market values in the event of a counterparty default (initial margin). The collateral given and received used in derivative contracts is mainly comprised of cash, and to a lesser extent, debt securities. The impact of the collateral received in clearing contracts is shown in the financial statements in note 4.q Offsetting of financial assets and liabilites.
As a general rule, when EAD is modelled in EEPE and weighted according to the IRB approach, the LGD (Loss Given Default) is not adjusted according to the collateral received since it is already taken into account in the Effective Expected Positive Exposure computation (see section Bilateral counterparty risk).
Collateral guarantees used in the standardised approach to reduce the EAD totalled EUR 444 million at 31 December 2020, compared with EUR 442 million at 31 December 2019.
The table below shows the breakdown of the collateral posted and received in respect of initial margins, margin calls as well as amounts in cash and in securities of repurchase agreements and securities lending and borrowing.
➤ TABLE 75: COMPOSITION OF COLLATERAL POSTED AND RECEIVED (EU CCR5-B)
In millions of euros
31 December 2020
Collateral used in derivative transactions Collateral used in SFTs(*)
Fair value of collateral received
Fair value of posted collateral
Fair value of collateral received
Fair value of posted collateral
Cash - euro 33,769 55,821 119,551 134,609
Cash - other currencies 20,356 25,194 299,982 249,652
Sovereign debt - euro 7,015 10,527 203,789 199,955
Sovereign debt - other currencies 4,823 7,876 262,572 304,567
Corporate and institutional debt 11,613 8,337 74,569 86,345
Equity 377 - 102,028 88,594
Other 183 - 737 772
TOTAL 78,135 107,755 1,063,228 1,064,493
(*) Securities Financing Transanctions.
