2018 Registration document and annual fi nancial report - BNP PARIBAS 393
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 s upervisory f ormula .
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 67: CVA RISK CAPITAL CHARGE (EU CCR2)
In millions of euros
31 December 2018 31 December 2017
EAD RWAs EAD RWAs
1 Advanced approach 51,688 2,676 32,901 1,693
2 CVA VaR charge 427 200
3 CVA SVaR charge 2,249 1,493
4 Standardised approach 653 414 546 217
5 TOTAL 52,341 3,090 33,447 1,910
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 posted, for both the portion hedging the contracts market value (v ariation m argin) and the risk of an adverse change in these market values in the event of a counterparty default (i nitial m argin). The collateral posted 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 fi nancial statements in note 5.q Offsetting of fi nancial assets and liabilites.
As a general rule, when EAD is modelled in EEPE and weighted according to the IRB a pproach, the LGD (Loss Given Default) is not adjusted according to the collateral received since they are 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 552 million at 31 December 2018, compared with EUR 562 million at 31 December 2017.
