EBA publishes final technical standards on structural foreign exchange

The European Banking Authority (EBA) has published its final Regulatory Technical Standards (RTS) on structural foreign exchange (FX) under the Capital Requirements Regulation (CRR). These standards aim to improve clarity, consistency, and supervisory convergence in the application of structural FX provisions across the European Union.

The final RTS maintain the overall approach of the existing EBA Guidelines, with targeted enhancements for a more harmonized and transparent framework.

Key elements include:

• Maximum open position computation: Institutions may consider only credit risk own funds requirements when determining the position that neutralizes sensitivity to capital ratios, where credit risk is the main driver of ratio variability.
• Clarifications on risk positions: The RTS provide guidance on how institutions should remove FX risk positions from own funds requirements.
• Policies for illiquid currencies: Provisions are introduced for currencies that are illiquid in the market, including those affected by Union restrictive measures.

Legal basis and background:

Article 104c of Regulation (EU) No 575/2013 (CRR) mandates the EBA to develop draft RTS specifying the risk positions institutions can take to hedge against adverse FX movements, how to determine the maximum waiver amount, and the criteria for appropriate risk management frameworks regarding structural FX positions.

More information is available on the official EBA website.