Final EU Guidelines on the Treatment of Structural FX Under Capital Requirements Regulation07/01/2020The European Banking Authority has published final guidelines on the implementation of the structural FX provision under the Capital Requirements Regulation. The CRR requires institutions to calculate their net open positions in currencies according to specified formulae but permits institutions to exclude positions that have been taken for hedging purposes and that are structural. The guidelines will apply to both firms and national regulators from January 1, 2022, to allow firms time to comply with the new framework. However, regulators should review, update or revoke permissions already granted before the guidelines apply.
The guidelines make certain clarifications regarding the regulatory treatment of the structural FX provision under the CRR and the extent of the exclusion for positions taken for hedging purposes, setting out governance and risk-management requirements for structural FX positions and how positions that are held at “historical cost” should be considered as part of the FX-open positions. Guidance is also given on the calculation of the maximum open position that can be excluded from the net open position, the calculation of own funds requirements for FX-risk and how national regulators should react to changes in the risk-management strategy of the structural FX positions.
View the final report and guidelines.
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