When a bank does not have regulatory approval to use Advanced CVA capital charge, which allows to calculate regulatory capital on counterparty-by-counterparty basis, the bank must calculate capital on portfolio level using the following formula (see Basel III: A global regulatory framework for more resilient banks and banking systems para. 103).

 
As was mentioned above, this is formula for Standardized CVA capital charge calculated at portfolio level, which in the given form does not allow to define main drivers and components of CVA capital charge. For this purpose we use decomposition, based on EAD on customer or even trade level. As we will see, it is possible to manage portfolio by hedging separate trades. Here is the example of CVA capital decomposition for portfolio of 250 derivatives with total notional of 4.5 bln (all numbers are in USD mln).

To decompose across customers (or trades), we use the derivative of with respect to trade level EAD. For the case without hedges, it can be represented as:

where .

Thus, counterparty-level capital charge for i-th counterparty is defined as: