16 October 2019
The European Banking Authority (EBA) launched today a consultation on draft Guidelines on the application of the Structural FX provision. These Guidelines aim at setting a regulatory framework on Structural FX to address the observed diversity in its application across the EU. In particular, the guidelines identify criteria to assist Competent Authorities in their assessment of the structural nature of a foreign-exchange position and whether such position has been deliberately taken for hedging the capital ratio. The consultation runs until 17 January 2020.
The concept and specific application of the Structural FX provision, as laid down in the Capital Requirements Regulation (CRR), appears to be subject to several interpretations, across both supervisory authorities and institutions. As a result, the application of this provision can have significant impacts on capital requirements. Accordingly, the EBA is of the view that a more harmonised application and enforcement of this provision is necessary and can be achieved thanks to these Guidelines.
This consultation paper is setting objective criteria that Competent Authorities should consider for the purpose of 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. These guidelines introduce for the first time a detailed regulatory framework around the Structural FX provision and several questions have been included as part of the consultation process to gather feedback around the proposed provisions.
Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 17 January 2020. All contributions received will be published following the close of the consultation, unless requested otherwise.
A public hearing will take place at the EBA premises in Paris on 25 November 2019 from 16:00 to 17:30 CET time.
Legal basis and background
The EBA has developed the draft Guidelines on its own initiative, in accordance with Article 16 of its founding Regulation, which mandates the Authority to issue guidelines and recommendations addressed to competent authorities or financial institutions with a view to establishing consistent, efficient and effective supervisory practices within the ESFS, and to ensuring the common, uniform and consistent application of Union law.
In June 2017, the EBA published a Discussion Paper on Structural FX to gather feedback on current stakeholders' practices and interpretations of the Structural FX provision. In January 2019, the final Basel FRTB standards were published setting out a new provision with respect to the Structural FX treatment. Accordingly, these Guidelines have been developed in light of both the feedback on the Discussion Paper and the new international standards.