According to article 94(1) of Regulation (EU) No 575/2013 (CRR), institutions which meet specific conditions are allowed to use an exception in calculating capital requirements considering trading book exposures. In letter (b) of abovementioned article it states that the size of institution's on- and off-balance sheet trading-book business should never exceed 6 % of total assets and EUR 20 million. It does not specify a time horizon for such an event. Should the institution calculate the trading-book business values starting from January 1st 2014 or from the day that it started their trading-book activity? For an example, if the institution’s trading-book business exceeded 6% of total assets only once on June 24 2013, could the derogation be applicable on January 2nd 2014? If not, for how long is the institution restricted from making use of the derogation specified in article 94(1)(b)?
Would not it be too restrictive to forbid the exception of small trading-book activities for the institution that exceed the condition once relevantly long time ago?
According to Article 521(2) of Regulation (EU) No 575/2013 (CRR) the requirements in Article 94(1) of the CRR apply from 1 January 2014. Therefore, an institution only needs to immediately notify its competent authority in cases where the conditions in Article 94(1)(b) of the CRR are not met after that date. If, following assessment by the competent authority, the competent authority determines and notifies the institution that the requirement of Article 94(1)(a) of the CRR is not met, the institution shall cease to make use of the derogation available under Article 94(1). In this case, the derogation for a small trading book business cannot be applied again without the express permission of the competent authority.