On 21 April 2023, the European Commission published Commission Delegated Regulation (EU) of 20 April 2023 supplementing the Capital Requirements Regulation on the calculation of the own funds requirements for market risk for non-trading book positions subject to foreign exchange risk or commodity risk and the treatment for those positions for the purposes of the regulatory back-testing requirements and the profit and loss attribution requirement under the alternative internal model approach.

The Delegated Regulation specifies that institutions are to use either the last available fair value or the accounting value as a basis for computing the own funds requirements for foreign-exchange risk positions in the non-trading book. Once the basis is identified, institutions are required to update the foreign-exchange risk components of the instrument attracting the foreign-exchange risk on a monthly basis under the alternative standardised approach, and on a daily basis under the alternative internal model approach.

The Delegated Regulation specifies that institutions are to use the fair value as a basis for computing the own funds requirements for commodity risk positions in the non-trading book. Consistently with the framework envisaged for foreign-exchange risk positions, institutions are required to fair value positions attracting commodity risk on a monthly basis under the alternative standardised approach.

Furthermore, the Delegated Regulation specifies the treatment for items that may be impaired due to the foreign-exchange risk they bear in order to ensure a harmonised treatment in the EU in their capitalisation.

Finally, the Delegated Regulation sets out, under the alternative internal model approach, a specific treatment on the calculation of the hypothetical and actual changes in the portfolio’s value related to non-trading book positions. This will make the back-testing and profit and loss attribution requirements referred to in Articles 325bf and 325bg of the Capital Requirements Regulation operational for non-trading book positions.

The Delegated Regulation shall come into force on the twentieth day following its publication in the Official Journal of the European Union.