Question ID
2013_213
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Market risk
Article
34, 105
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
N/A
Type of submitter
Credit institution
Subject matter
Additional value adjustments
Question

According to the Article 34 of Regulation (EU) No 575/2013 (CRR), institutions shall apply the requirements of Article 105 to all their assets measured at fair value when calculating the amount of their own funds and shall deduct from Common Equity Tier 1 capital the amount of any additional value adjustments necessary. Does the provision “to all their assets measured at fair value” mean that this Article concerns all trading book positions or this Article concerns all trading and banking book positions?

Background on the question

According current binding regulations additional value adjustments concerns only trading book positions.

Submission date
Final answer

While Article 105 of Regulation (EU) No 575/2013 (CRR) refers to the prudent valuation standards being applicable to all trading book positions, Article 34 of CRR requires that institutions shall apply the standards of Article 105 to all assets measured at fair value when calculating the amount of their own funds.

Therefore the prudent valuation requirements specified in Article 105 apply to fair valued positions for the purposes of Article 34 regardless of whether they are held in the trading book or banking book.[i]

[i] N.B This treatment is in line with paragraph 24 of the final revisions to the Basel II framework as published on 13.07.2009, whereby prudent valuation guidelines shall apply to "positions that are accounted for at fair value, whether they are in the trading book or in the banking book."

Status
Archive
Answer prepared by
Answer prepared by the EBA.
Note to Q&A

Update 16.09.2021: This Q&A has been archived in light of the change(s) in Article 34 to Regulation (EU) No 575/2013 (CRR), applicable from 28.06.2021.