- Question ID
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2015_1745
- Legal act
- Regulation (EU) No 575/2013 (CRR)
- Topic
- Market risk
- Article
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351/352
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Not applicable
- Article/Paragraph
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351/352
- Type of submitter
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Individual
- Subject matter
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Calculation and reporting of own funds requirement for Market risk: Foreign exchange risk
- Question
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According to article 351 of CRR 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 % while in article 352 (4) of CRR the net foreign exchange position is calculated as follow: “ Net short and long positions in each currency other than the reporting currency and the net long or short position in gold shall be converted at spot rates into the reporting currency. They shall then be summed separately to form the total of the net short positions and the total of the net long positions respectively. The higher of these two totals shall be the institution's overall net foreign-exchange position.” It seems that according to article 351 the institution should calculate two different Positions subject to capital charge: the first one for exposures in foreign exchange currencies and the second one for gold and calculate as a consequence two different own fund requirement - according to Eba template design. While according to calculation described in article 352 it seems that the institution should calculate only one Position subject to capital charge that considers foreign exchange currencies and gold too; as a consequence in order to fill in the EBA templates that requires all information splitted in different rows, the institution should provide a breakdown of the total value previously calculated according to a proportion. In this case how should the institution calculate this proportion? According to this different approaches it is possible to obtain two different results (in terms of total own fund requirement), here below an example: Article 351: Net long positions Net short positions MAX – position subject to capital charge Foreign exchange currencies 70 50 70 Gold 60 60 Total 130 Article 352 (4): Net long positions Net short positions MAX – position subject to capital charge Foreign exchange currencies 70 50 Gold 60 Total 70 110 110 According to the first approach the institution will obtain a higher Position subject capital charge. Which approach shall we use?
- Background on the question
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Correct calculation of own funds requirements for foreign exchange risk and correct regulatory reporting according to Eba templates.
- Submission date
- Rejected publishing date
-
- Rationale for rejection
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Please note that as part of adjustments to the Single Rulebook Q&A process, agreed by the EBA and the European Commission, it has been decided to reject outstanding questions submitted before 1 January 2020, when the Q&A process was updated as part of the last ESAs Review. In particular, the question that you have submitted has now regrettably been rejected and will not be addressed.
If you believe your question would still benefit from clarification, you are invited to resubmit your question, adapting it to reflect any legislative, regulatory or other relevant developments that may have occurred since the initial date of submission. The EBA will aim to address resubmitted questions as a matter of priority. When considering to resubmit, you are kindly requested to observe the updated admissibility criteria agreed in the context of the adjustment of the Q&A process, available in the Additional background and guidance for asking questions. We hope for your understanding.
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- Status
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Rejected question