3952019 Universal registration document and annual financial report - BNP PARIBAS
5risks and CaPital adequaCy Pillar 3
5
Counterparty credit risk
In millions of euros
31 December 2019 31 December 2018
EAD RWAs EAD RWAs
Advanced approach 37,107 2,034 51,688 2,676
CVA VaR charge 281 427
CVA SVaR charge 1,753 2,249
Standardised approach 353 260 653 414
TOTAL 37,460 2,294 52,341 3,090
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 70: CVA RISK EXPOSURE AT DEFAULT AND RISK-WEIGHTED ASSETS (EU CCR2)
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 5.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 442 million at 31 December 2019, compared with EUR 552 million at 31 December 2018.
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 71: COMPOSITION OF COLLATERAL POSTED AND RECEIVED (EU CCR5-B)
In millions of euros
31 December 2019
Collateral used in derivative transactions Collateral used in SFTs(*)
Fair value of collateral received
Fair value of collateral posted
Fair value of collateral received
Fair value of collateral posted
Cash euro 33,285 37,012 137,383 149,081
Cash other currencies 18,810 19,900 236,981 213,017
Sovereign debt euro 5,961 9,828 193,217 184,522
Sovereign debt other currencies 4,026 5,837 203,200 221,090
Corporate and institutional debt 10,711 8,359 77,793 86,528
Equity 172 - 86,458 70,182
Other 370 - 235 110
TOTAL 73,335 80,936 935,267 924,530
(*) Securities Financing Transanctions.
