CVA Risk Soars at DBS and UOB
- Credit valuation adjustment (CVA) risk-weighted assets (RWAs) experienced a notable increase at two of Singapore's largest banks during the second quarter of 2025, reaching levels not seen sence...
- CVA represents a charge banks take to cover potential losses if a counterparty defaults on a contract.
- DBS Bank reported a 12% climb in its CVA RWAs, reaching S$10.8 billion (approximately US$8.4 billion as of August 23, 2025).
Singaporean Banks See Surge in Credit Risk Exposure
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Rising Credit Valuation Adjustment (CVA) Risk
Credit valuation adjustment (CVA) risk-weighted assets (RWAs) experienced a notable increase at two of Singapore’s largest banks during the second quarter of 2025, reaching levels not seen sence at least 2018. This signals a growing concern about potential losses stemming from counterparty credit risk.
CVA represents a charge banks take to cover potential losses if a counterparty defaults on a contract. An increase in CVA RWAs suggests banks are anticipating a higher probability of such defaults, or that the size of potential exposures has grown.
DBS Bank and UOB Lead the Increase
DBS Bank reported a 12% climb in its CVA RWAs, reaching S$10.8 billion (approximately US$8.4 billion as of August 23, 2025). United Overseas Bank (UOB) saw an even more substantial increase,with CVA RWAs growing by 15.5% to S$4.1 billion.These figures highlight a trend of increasing risk exposure within the Singaporean banking sector.
| Bank | CVA RWA Increase | Total CVA RWA (SGD Billion) | Total CVA RWA (USD Billion) |
|---|---|---|---|
| DBS bank | 12% | 10.8 | 8.4 |
| UOB | 15.5% | 4.1 | N/A |
What Drives CVA Increases?
Several factors can contribute to rising CVA RWAs. These include a deteriorating macroeconomic outlook, increased geopolitical instability, and changes in regulatory requirements.A slowdown in global economic growth, for example, could lead to a higher incidence of corporate defaults, increasing the risk for banks with exposure to those companies. Moreover, shifts in accounting standards or capital adequacy rules can also necessitate higher CVA provisions.