Question ID
2016_2692
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Market risk
Article
348, 350
Paragraph
1
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Regulation (EU) No 528/2014 - RTS on non-delta risk of options in the standardised market risk approach
Article/Paragraph
Article 8
Type of submitter
Credit institution
Subject matter
Position Risk Own Funds Requirement for options positions on CIUs
Question

Is there an own funds requirement for the non-delta risk of options on Collective Investment Undertakings which are treated for position risk in accordance with Article 348 of Regulation (EU) No 575/2013 (CRR)?

Background on the question

Articles 348-350 CRR set out the own funds requirements for positions in CIUs. Article 348 CRR states that CIUs are subject to an own funds requirement for position risk, comprising specific and general risk, of 32%. Therefore those CIUs which cannot be looked through in accordance with Article 350 CRR will be subject to this own funds requirement for position risk of 32%. As the underlying investments of the CIU may be made across several sectors, it is not possible to equate them to a single classification such as equity, commodity, etc.
The EBA FINAL draft Regulatory Technical Standards "On non-delta risk of options in the standardised market risk approach under Articles 329(3), 352(6) and 358(4) of Regulation (EU) No 575/2013 (Capital Requirements Regulation -CRR)" references 4 types of underlyings (Interest Rates, Equities, Foreign Exchange and Gold, Commodities) but does not reference CIUs.

Submission date
Final publishing date
Final answer

When the approaches set out in Article 350 of Regulation (EU) No 575/2013 (CRR) (look-through approaches and other) are not applied, a percentage of 32% or 40% should be applied to comprehensively calculate the own funds requirements for CIU positions pursuant to Article 348 CRR. In that case no additional treatment is required for position risk of CIU in the trading book, contrary to the cases of the look-through approach and other approaches referred to in Article 350 CRR where positions in CIUs shall be treated as positions in the underlying investment of the CIUs.
Therefore, the RTS on non-delta risk of options in the standardised market risk approach does not apply to positions treated under Article 348 CRR.

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.

Disclaimer

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