Question ID
2024_7161
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Market risk
Article
352
Paragraph
2
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
EBA/GL/2020/09 - Guidelines on the treatment of structural FX under Article 352(2) of CRR
Article/Paragraph
35
Type of submitter
Credit institution
Subject matter
Calculation of the capital requirements for structural FX risk
Question

In the context of article 352.2, when there is an investment in a subsidiary denominated in foreign currency and this subsidiary has invested in other subsidiary denominated in the same foreign currency must this exposure be always exempted from capital requirements calculation? 

Background on the question

EBA explains in EBA Guidelines on the treatment of structural FX under Article 352(2) of Regulation (EU) No 575/2013 (CRR) page 97 example 7 a case where a company invests in a company denominated in a foreign currency, and the guidelines determine that the maximum open position must be 0 because the CET1 of the institution is not sensitive to changes in the FX rate. 

Following this criteria, in the case of a subsidiary which invest into another subsidiary  denominated in foreign currency which is the currency of its main operations must be the same conclusion, the net open positions must be 0. 

For example:

Parent co is denominated in EUR and invests in subsidiary A which is denominated in USD. Subsidiary A invests in subsidiary B which is also denominated in USD.

Parent co

Monetary Assets in EUR                              30.000

Historical Assets in USD  subsidiary A    1.000

Monetary Liabilities in EUR                        28.000

CET1 in EUR                                                   3.000

 

Subsidiary A

Monetary Assets in USD                                            10.000

Historical Assets in USD subsidiary B                    1.000

Monetary Liabilities in USD                                       10.000

CET1 in USD                                                                  1.000

 

Subsidiary B

Monetary Assets in USD                                            4.000

Monetary Liabilities in USD                                       3.000

CET1 in USD                                                                  1.000

Submission date
Rejected publishing date
Rationale for rejection

This question has been rejected because the issue it raises is not material i.e. it does not raise a prudential, payments, consumer protection, resolution or other regulatory issue that is within the EBA’s remit.

The Single Rule Book Q&A tool has been established to provide explanations and non-binding interpretations on questions relating to the practical application or implementation of the provisions of legislative acts referred to in Article 1(2) of the EBA’s founding Regulation, as well as associated delegated and implementing acts, and guidelines and recommendations, adopted under these legislative acts.

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Status
Rejected question