The Basel Committee on Banking Supervision finalized its review of the Basel III standard for capital treatment for counterparty credit risk in bilateral trades and plans to modify the risk weighting of credit valuation adjustment (CVA), which is the risk of loss caused by changes in the credit spread of a counterparty due to changes in its credit quality.

The Basel committee was previously concerned that the standardized method for calculating CVA risk under Basel III  was more punitive than the advanced method of calculation, for low-rated counterparties with longer maturity transactions.

Under the modification to CVA, the Basel Committee has adjusted risk weights applied to `CCC`-rated counterparties  to 10% from 18%, which levels the gap between the standardized and advanced methods for calculation under Basel III.

The addition of the CVA risk capital charge means that the capital requirements for counterparty credit risk under Basel III will double the level required under Basel II. 

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