This change is motivated by the fact that “two-thirds of the Counterparty Credit Risk losses were due to credit valuation adjustments and only about one-third were due to actual defaults”. 3.
Limit the inherent procyclicality of the existing framework with the introduction of (a) capital buffers beyond the regulatory minimum, which will be built-up in good times so that they can be drawn upon during stress periods and (b) “forwardlooking” provisioning based on expected losses to substitute for the current “incurred loss” provisioning model. 4.