Book traversal links for H. Risk-Weighted Assets
H. Risk-Weighted Assets
C 52/2017 STA Effective from 1/4/202135.The formula developed by the BCBS to determine CVA capital reflects a calibration based on the 8% minimum capital ratio applied in the Basel capital framework. To calculate a corresponding RWA amount, the Standards requires banks to multiply the calculated CVA capital by a factor of 12.5, which is the reciprocal of 8%. That is, 1/(0.08) = 12.5. This multiplication is appropriate even if the Central Bank applies a higher minimum capital requirement to the resulting RWA, because the purpose of the multiplication by 12.5 is to reverse the calibration implicitly used by the BCBS to produce a capital number in the original formulation.