On 24 October 2024, the European Banking Authority (EBA) issued a consultation paper on draft regulatory technical standards (RTS) on the treatment of structural foreign exchange (FX) positions under Article 104c of the Capital Requirements Regulation (CRR) and on the reporting on structural FX positions.
Prior to the CRR 3, the concept and specific application of the structural FX provision pursuant to Article 352(2) of the CRR had been subject to several interpretations, across both supervisory authorities and institutions. To ensure a harmonised EU interpretation and implementation, the EBA published in 2020 guidelines on how to implement the structural FX provision contemplated in Article 352(2) of the CRR.
As part of the CRR3 legislative process, the co-legislators introduced a mandate for the EBA to develop RTS on structural FX positions.
Changes
The EBA consultation explains that the draft RTS overall keep the provisions in the guidelines and that there have only been a few changes including:
- The introduction of clear quantitative thresholds for a currency to be considered eligible for the structural FX treatment; this is proposed in view of reducing observed variability in the currencies that were considered relevant for the business under the guidelines.
- The possibility for banks to consider only credit risk own funds requirements when determining the position neutralising the sensitivity to the capital ratios, as long as the credit risk own funds requirements are the one driving the variability of the ratio against FX changes.
- Clarifications around how institutions are to remove the risk position from the own funds requirements for foreign exchange risk.
- Provisions relating the institution’s policies as regards currencies that are particularly illiquid in the market, for example, because of EU restrictive measures.
Reporting
In the consultation paper the EBA sets out a proposal for the reporting on structural FX permissions granted by Member State competent authorities.
Next steps
The deadline for comments on the consultation paper is 7 February 2025.
The EBA will assess the feedback received during the public consultation, before submitting the final draft RTS to the European Commission.