EBA · 2021_6190 Rejected question

Classification of derivatives on precious metals without physical underlying under SA-CCR

Regulation
Regulation (EU) No 575/2013 (CRR)
Article
271
Topic
Credit risk
Submitted by
Credit institution
Submitted
2021-09-08
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Question

For Credit Risk calculation and in order to classify derivatives into the proper Risk Category (Commodity vs. FX Risk) under SA-CCR. Can you please advise on the category to use when derivatives on Gold do not have physical underlying ? Example with a Gold Option for which only the currency for Gold is used (XAU) and where Gold is physically not existing. Also, can you please advise if the same logic have to be applied for other precious metals (not physical) like Silver or Palladium ?

Background

Article 274 (2) EU regulation 575/2013 indicates the different possible classification below for derivatives contracts : - FX and GOLD - Other precious metals - Other commodities than precious metals Article 357 (2) EU regulation 575/2013 confirmed that Gold Options should be treated as "FX Risk". Article 325as EU regulation 2019/876 indicate that precious metals (including gold) should be classified as ''Commodity Risk''
No answer published yet.

Original source: European Banking Authority, Q&A ID 2021_6190

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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