On 16 October 2019, the European Banking Authority (EBA) launched a consultation on draft guidelines on the application of the structural FX provision under Article 352(2) of the Capital Requirements Regulation (CRR).
Article 352(2) allows Member State competent authorities (NCAs) to authorise, on an ad hoc basis, the exclusion of FX risk positions deliberately taken by firms to hedge against the adverse effect of exchange rates on capital ratios from the calculation of the net open currency positions where those positions are of a non-trading or structural nature. The guidelines are intended to set a regulatory framework on structural FX to address the reported diversity in its application across the EU as it currently is subject to several interpretations across both supervisory authorities and institutions.
The consultation paper sets out objective criteria that NCAs should consider when assessing whether the conditions set out in Article 352(2) of the CRR for receiving the permission to exclude a foreign-exchange position from the net open position in the foreign currency are met.
The deadline for comments to the consultation is 17 January 2020. The EBA will hold a public hearing at its premises in Paris on 25 November 2019.