Question ID
2014_1107
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Supervisory reporting - COREP (incl. IP Losses)
Article
99
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
Article/Paragraph
Annex I, C 22.00 - MKR SA FX, validation rule v0629_m
Name of institution / submitter
BearingPoint Software Solutions
Country of incorporation / residence
Germany
Type of submitter
Consultancy firm
Subject matter
Validation Rule v0629_m
Question

Can rule v0629_m be valid in any case? Namely, in some cases (see background information) the own funds requirements for foreign exchange stipulate that the foreign exchange risk be calculated as the sum of its overall net foreign exchange position and its net gold position in the reporting currency, multiplied by 8 %, not by 12,5%, which is what the rules, in effect, validates.

Background on the question

According to Article 351 CRR: If the sum of an institution's overall net foreign-exchange position and its net gold position, calculated in accordance with the procedure set out in Article 352, including for any foreign exchange and gold positions for which own funds requirements are calculated using an internal model, exceeds 2 % of its total own funds, the institution shall calculate an own funds requirement for foreign exchange risk. The own funds requirement for foreign exchange risk shall be the sum of its overall net foreign exchange position and its net gold position in the reporting currency, multiplied by 8 %.

Submission date
Final publishing date
Final answer

According to Art 351, sentence 2 of Regulation (EU) No. 575/2013 (CRR), an institution calculates its own funds requirements by multiplying the sum of its overall net foreign exchange position and its net gold position in the reporting currency with 8%. In order to calculate the total risk exposure amount according to Art. 92 (3) CRR, Art. 92 (4) b) CRR requires a multiplication of own funds requirements of foreign exchange risk by 12.5. This multiplication is reflected in validation rule v0629_m applicable to template C 22.00 of Annex I to Regulation (EU) No. 680/2014 (ITS on Supervisory Reporting). Therefore this validation rules is valid in any case.

Status
Final Q&A
Answer prepared by
Answer prepared by the EBA.

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