Changes in capital requirements due to Basel 2.5 (Basel Committee on Banking Supervision 2011b) and Basel III (Basel Committee on Banking Supervision 2011a) contributed to major reorganisations in trading activity after the financial crisis of 2008. Surveys by Sherif (2015) and Ernst & Young (2015) indicate that banks are pricing the lifetime cost of capital (KVA) into trades, and pricing methods have been formalised (Green et al 2014; Kenyon and Green 2015; Elouerkhaoui 2016b) but no accounting treatment has been presented. By accounting treatment we mean both the values of the numbers and where they should go. This chapter addresses this gap from the point of view of the International Accounting Standards Board (IASB) standards, reflecting IFRS 13 (Fair Value Measurement; see IFRS Foundation 2014c) in particular.
|Title of host publication||Landmarks in XVA|
|Subtitle of host publication||From Counterparty Risks to Funding Costs and Capital|
|Editors||Chris Kenyon, Andrew Green|
|Place of Publication||London|
|Publication status||Published - 8 Apr 2016|
- XVA, KVA, derivatives, banking