EBA · 2014_1107 Final Q&A

Validation Rule v0629_m

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
99
Topic
Supervisory reporting - COREP (incl. IP Losses)
Submitted by
Consultancy firm
Submitted
2014-04-25
Answered
2016-10-14
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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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

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 %.

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.

Original source: European Banking Authority, Q&A ID 2014_1107

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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