EBA · 2015_2317 Final Q&A

Exclusion of positions from the calculation of net open currency positions

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
351, 352
Topic
Market risk
Submitted by
Consultancy firm
Submitted
2015-09-22
Answered
2016-04-28
Answer provided by
ESAs (EBA, ESMA, EIOPA)
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Question

May positions that are already deducted in the calculation of own funds be excluded from the calculation of net open currency positions according to Articles 351, 352 of the Regulation (EU) No 575/2013 (CRR)? If the answer is "yes", are there any explicit legal provisions that say so?

Background

To the knowledge of the questioner, there are no provisions in the CRR that explicitly allow for excluding positions from the calculation of net open currency positions. In particular, the last sentence of Article 352(2) of the Regulation (EU) No 575/2013 (CRR) does not contain such a provision. That sentence only refers to positions that relate to positions already deducted, but not the deducted positions themselves. Thus, it remains unclear whether deducted positions need to be taken into account for RWA calculation. On the other hand, it seems inappropriate to have such positions considered as risky assets for the purpose of RWA calculation even though they do not even count as own funds. The above question can be generalized to all market risks (position risk, equity risk, commodity risk) and even more to other asset-based risk types like credit risk. It would be helpful if you could answer the question in general if the answer is "yes" in all cases.

Answer

Under Article 352(2) of the Regulation (EU) No 575/2013 (CRR) ‘structural FX’ positions as well as FX positions related to items that are deducted in the calculation of own funds may, subject to conditions and an explicit permission by competent authorities, be excluded from the calculation of net open currency positions. In this regard, “positions which relate to items that are already deducted” shall mean the deducted item itself. The ‘de minimis’ exemption for FX established in Article 351 CRR states that the positions have to be calculated in accordance with Article 352 CRR. Accordingly, when calculating the ‘de minimis’ exemption, institutions should exclude positions related to items that are deducted in the calculation of own funds, provided its competent authority has explicitly authorised this treatment.

Original source: European Banking Authority, Q&A ID 2015_2317

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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