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Counterparty Credit Risk (SA-CCR) — Basel 3.1

Cross-reference page. The Standardised Approach for Counterparty Credit Risk (SA-CCR) under PRA PS1/26 is inherited unchanged from the onshored CRR text — Part Three, Title II, Chapter 6 (Art. 271–311) is a verbatim re-export with the Basel 3.1 calibration (α = 1.4 default, unchanged supervisory factors at Art. 280 Table 1) retained. There are no Basel 3.1 SA-CCR per-article specs in this directory because there are no per-article rule changes — only two cross-framework deltas worth flagging at the Basel 3.1 layer (the Art. 274(2) α carve-out wording and the explicit Art. 92(2A) output-floor inclusion of SA-CCR EAD).

Calculator parity by default

Calculator behaviour is identical between CRR and Basel 3.1 modes for the SA-CCR EAD chain (compute_adjusted_notional_* → compute_supervisory_delta_* → compute_maturity_factor_* → assign_hedging_set → compute_addon_per_asset_class → compute_rc_unmargined → compute_pfe → compute_ead). No separate Basel 3.1 per-article specs exist. The canonical regulatory content lives under SA-CCR (CRR) — readers go there for formulas, tables, hedging-set partition rules, supervisory factors, and worked CCR-A1 / CCR-A2 acceptance scenarios.

Primary regulatory source: PRA PS1/26 Part Three Title II Chapter 6 (Art. 271–311) — Counterparty Credit Risk (CRR) Part, Annex R. The SA-CCR regime is a verbatim re-export of the onshored CRR text.

Basel 3.1-specific deltas

(a) α-factor carve-out for non-financial counterparties (Art. 274(2))

PS1/26 retains the SA-CCR exposure-value formula EAD = α × (RC + PFE) from CRR Art. 274(2), with α = 1.4 as the default scalar. The verbatim text (PS1/26 Annex R, Counterparty Credit Risk (CRR) Part, p. 456; source PDF docs/assets/ps126app1.pdf) is:

"Institutions shall calculate the exposure value of a netting set under the standardised approach for counterparty credit risk as follows:

Exposure value = α · (RC + PFE)

where:

  • RC = the replacement cost calculated in accordance with Article 275; and
  • PFE = the potential future exposure calculated in accordance with Article 278;
  • α = 1.4, unless the counterparty is a non-financial counterparty or a pension scheme arrangement or an entity established to provide compensation to members of a pension scheme arrangement in case of default, in which case, α = 1."

The α = 1 carve-out applies to derivative contracts with:

  • non-financial counterparties below the EMIR clearing threshold, as defined in Regulation (EU) No 648/2012 Art. 2(9);
  • pension scheme arrangements as defined in EMIR Art. 2(10); and
  • entities established to provide default compensation to members of a pension scheme arrangement.

Removing the 1.4 calibration uplift reduces SA-CCR EAD (and the corresponding RWA) for in-scope end-user counterparties by a factor of 1 / 1.4 ≈ 0.714 — see the worked sensitivity at crr/ccr/ead-composition.md#sensitivity-to-α.

Engine status — α = 1 carve-out gate not yet wired

The α value is configurable via CCRConfig.alpha (defaults to Decimal("1.4") at src/rwa_calc/contracts/config.py), and the composition function at src/rwa_calc/engine/ccr/sa_ccr.py::compute_ead applies whatever α is supplied uniformly across the input frame. However, the per-counterparty dispatch gate that would route non-financial counterparty / pension-scheme netting sets through α = 1 while keeping the rest at α = 1.4 is not yet implemented in engine/ccr/pipeline_adapter.py::ccr_rows_to_exposures — today's orchestrator applies the default α = 1.4 to every netting set. Firms requiring the carve-out must invoke compute_ead twice with two CCRConfig instances and concatenate the results. Tracked in the project root IMPLEMENTATION_PLAN.md as a documented engine gap; the math itself is exercised by the CCRConfig.alpha override hook.

The companion Art. 274(2A) transitional alpha add-on for legacy CVA-exempt trades (60% → 40% → 20% phase-in over 2027–2029) is documented on the CRR EAD-composition page and remains a separate engine gap — see crr/ccr/ead-composition.md#pending.

(b) Output-floor inclusion of SA-CCR EAD (Art. 92(2A))

Under PS1/26 Art. 92(2A) the SA-CCR EAD contributes to both legs of the output-floor TREA comparison:

TREA = max{U-TREA; x × S-TREA + OF-ADJ}
  • U-TREA leg (Art. 92(3)) — the IRB-permissioned firm risk-weights the synthetic CCR exposure row (risk_type = "CCR_DERIVATIVE") through IRB if the counterparty has an IRB model; otherwise SA. The resulting RWA enters U-TREA directly.
  • S-TREA leg (Art. 92(3A)) — the same synthetic CCR row is re-run through the SA risk-weight calculator (IRB explicitly disallowed for S-TREA), producing an SA-equivalent RWA that enters S-TREA. The SA-CCR EAD itself does not change between the two legs — only the downstream risk-weight lookup changes. Art. 92(3A) explicitly lists IRB, SFT VaR, SEC-IRBA, IAA, IMM, and IMA as the modelled approaches excluded from S-TREA; SA-CCR is not on that exclusion list and therefore feeds both legs unchanged.

The α = 1.4 multiplier therefore amplifies the floor impact for IRB firms whose IRB CCR EAD methodology (IMM, if permissioned) would otherwise produce a lower exposure number than SA-CCR. Conversely, an IRB firm using SA-CCR for its U-TREA leg sees identical EAD in both legs — only the risk weight differs.

See output-floor.md for the full TREA formula, the PRA 4-year transitional schedule (60% → 65% → 70% → 72.5% per Art. 92(5)), and the OF-ADJ own-funds adjustment. See crr/ccr/ead-composition.md#interaction-with-the-basel-31-output-floor for the engine-side routing of the synthetic CCR row into both legs.

CRR per-article specifications (canonical content)

The complete SA-CCR rule set — formulas, hedging-set partition rules, supervisory factors, worked CCR-A acceptance scenarios — lives on the CRR per-article pages. The two deltas above are the only Basel 3.1 overlays; everything else is unchanged.

References

  • PRA PS1/26 Part Three Title II Chapter 6 (Art. 271–311) — Counterparty Credit Risk (CRR) Part, Annex R. UK SA-CCR regime; verbatim re-export of onshored CRR text, no per-article changes versus CRR.
  • PRA PS1/26 Art. 274(2) — Exposure value = α × (RC + PFE), α = 1.4 default, α = 1 carve-out for non-financial counterparties / pension scheme arrangements / pension-default compensation entities.
  • PRA PS1/26 Art. 92(2A) — output-floor TREA formula TREA = max{U-TREA; x × S-TREA + OF-ADJ} consuming SA-CCR EAD in both legs via the synthetic CCR exposure row.
  • PRA PS1/26 Art. 92(3A) — S-TREA calculated without IRB, SFT VaR, SEC-IRBA, IAA, IMM, or IMA; SA-CCR is not on the exclusion list.
  • PRA PS1/26 Art. 92(5) — output-floor 4-year transitional schedule (60% / 65% / 70% / 72.5%).
  • Regulation (EU) No 648/2012 (EMIR) Art. 2(9), Art. 2(10) — definitions of "non-financial counterparty" and "pension scheme arrangement" underpinning the Art. 274(2) α = 1 carve-out.
  • BCBS CRE52.1–52.5 — Basel-level SA-CCR methodology and α = 1.4 calibration rationale.
  • Output floor (Basel 3.1) — full TREA formula, PRA transitional schedule, OF-ADJ own-funds adjustment.
  • SA-CCR (CRR) — EAD composition — engine entry point, CCRConfig.alpha override hook, synthetic exposure-row contract, CCR-A1 worked example, and pending engine gaps (Art. 274(2) carve-out dispatch, Art. 274(2A) transitional alpha add-on, Art. 274(2B) leverage-ratio exclusion).