Question ID
2014_1318
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Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)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
Template C 22.00
Name of institution / submitter
Bulgarian National Bank
Country of incorporation / residence
Bulgaria
Type of submitter
Credit institution
Subject matter
Reporting of positions in closely correlated currencies (CRR Art. 354)
Question

Template C 22..00 (MARKET RISK: STANDARDISED APPROACHES FOR FOREIGN EXCHANGE RISK (MKR SA FX) wrongly assumes that any pair of currencies closely correlated (row 020) can only be two non-reporting currencies. In fact, one of them can be the reporting currency of the reporting institution. This requires change of the title of the aggregate row 010 as well of the common title of columns 060-080.

Background on the question

Bulgaria operates a currency board system where banks can have material position of Bulgarian leva versus euro and vice versa due to purely economical reasons. Such positions can be quite material and have to be treated for foreign exchange risk according to CRR Art.354, namely para 6 (until the end of 2017) and later according to para 1. Please also note the content of para 5. If the titke of aggregate row 010 is left unchanged, these material position do not have appropraite place to be reported.

Submission date
Final publishing date
Final answer
The prudential treatment of closely correlated currencies is provided in Article 354 of Regulation (EU) 575/2013 (CRR). Based on Article 354(3) CRR, Regulation (EU) 2015/2197 (ITS on closely correlated currencies) lists the currencies for which the treatment provided in article 354(1) CRR is allowed.  While Commission Implementing Regulation (EU) 2015/2197 does not explicitly address the issue of this question, Q&A 2015_2139 clarifies that “There is no restriction on the application of the provisions of Article 354 Regulation (EU) No 575/2013 (CRR) to currencies that are closely correlated to the reporting currency, as long as the pair of the reporting currency and the currency that is closely correlated to it, is listed in the Implementing Technical Standards (ITS) on closely correlated currencies (Commission Implementing Regulation (EU) 2015/2197).” Therefore the prudential treatment provided in Article 354(1) CRR is applicable to currencies that are closely correlated to the reporting currency of the reporting institution. Institutions shall include that part of the open position in the reporting currency that is considered for the purposes of Article 354 CRR, i.e. that forms part of a matched position in two closely correlated currencies, in row 010 of template C 22.00 of Annex I to Regulation (EU) No 680/2014 (ITS on Supervisory Reporting). Template C 22.00 and the related instructions will be amended to reflect this. 
Status
Final Q&A
Answer prepared by
Answer prepared by the EBA.

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