Standardized Approach for Credit Valuation Adjustment Risk

Effective from Dec 28 2022 - Dec 27 2022
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11.27.	The SA-CVA is an adaptation of the standardized approach for market risk set out in Chapter 6 to Chapter 9 of the Minimum Capital Requirements for Market Risk. The primary differences of the SA-CVA from the standardized approach for market risk are:
	(1)	The SA-CVA features a reduced granularity of market risk factors; and
	(2)	The SA-CVA does not include default risk and curvature risk.
11.28.	Under the SA-CVA, capital requirements must be calculated and reported to SAMA at the same frequency as for the market risk standardized approach. In addition, banks using the SA-CVA must have the ability to produce SA-CVA capital requirement calculations at the request of SAMA and must accordingly provide the calculations.
11.29.	The SA-CVA uses as inputs the sensitivities of regulatory CVA to counterparty credit spreads and market risk factors driving the values of covered transactions. Sensitivities must be computed by banks in accordance with the prudent valuation guidance set out in Basel Framework.
11.30.	For a bank to be considered eligible for the use of SA-CVA by SAMA as set out in 11.7 of this framework, the bank must meet the following criteria at the minimum.
	(1)	A bank must be able to model exposure and calculate, on at least a monthly basis, CVA and CVA sensitivities to the market risk factors specified in 11.54 to 11.77 in this framework.
	(2)	A bank must have a CVA desk (or a similar dedicated function) responsible for risk management and hedging of CVA.