EBA · 2014_1171 Final Q&A

Calculation of foreign exchange position for non-FX derivatives denominated in foreign currency

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
352, para. 1
Topic
Market risk
Submitted by
Other
Submitted
2014-05-09
Answered
2014-09-12
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

Should non-FX derivatives denominated in foreign currency be treated as cash position or net forward position? Should it be treated in market value (as showed in balance sheet) or like FX swaps in principal amount (as showed in off-balance sheet)?

Background

Article 352 of Regulation (EU) No 575/2013 (CRR) requires institutions to calculate net open position in each currency for both net spot and net forward position. It is not clear how we should calculate position for instrument which have non-zero value in both balance and off-balance sheet.

Answer

Note: As of 29 11 2019 the answer to this question has been repealed. For guidance on the issue in question please refer to Q&A 3137   To ensure coherence between the calculation of positions for options and for other derivatives, non-FX derivatives denominated in a foreign currency should be treated as a cash position in the underlying's base currency, equal to the market value of the underlying, as per the treatment for 'other options' referred to in Article 352(1)(e) of Regulation (EU) No 575/2013.

Original source: European Banking Authority, Q&A ID 2014_1171

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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