2014_1171 Calculation of foreign exchange position for non-FX derivatives denominated in foreign currency

Question ID:

2014_1171

Legal Act:

Regulation (EU) No 575/2013 (CRR)

Topic:

Market risk

Article:

352

Paragraph:

COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations:

Not applicable

Article/Paragraph:

Disclose name of institution / entity:

Type of submitter:

Other

Subject Matter:

Calculation of foreign exchange position for non-FX derivatives denominated in foreign currency

Question:

Should non-FX derivatives denominated in foreign currency be treated as cash position or net forward position? Should it be treated in market value (as showed in balance sheet) or like FX swaps in principal amount (as showed in off-balance sheet)?

Background on the question:

Article 352 of Regulation (EU) No 575/2013 (CRR) requires institutions to calculate net open position in each currency for both net spot and net forward position. It is not clear how we should calculate position for instrument which have non-zero value in both balance and off-balance sheet.

Date of submission:

09/05/2014

Published as Final Q&A:

12/09/2014

Final Answer:

Note: As of 29 11 2019 the answer to this question has been repealed. For guidance on the issue in question please refer to Q&A 3137

To ensure coherence between the calculation of positions for options and for other derivatives, non-FX derivatives denominated in a foreign currency should be treated as a cash position in the underlying's base currency, equal to the market value of the underlying, as per the treatment for 'other options' referred to in Article 352(1)(e) of Regulation (EU) No 575/2013.

Status:

Final Q&A

Answer prepared by:

Answer prepared by the EBA.

Note to Q&A:

Update 26.03.2021: This Q&A has been reviewed in the light of the changes introduced to Regulation (EU) No 575/2013 (CRR) and continues to be relevant.