EBA欧洲银行-Discussion-Paper-on-the-treatment-of-structural-FX-28EBA-DP-2017-0129_33页_775kb

Summary of EBA/DP/2017/01: Treatment of Structural FX under Article 352(2) of the CRR

Core Content

This Discussion Paper (DP) by the European Banking Authority (EBA) addresses the treatment of structural foreign exchange (FX) positions under Article 352(2) of the Capital Requirements Regulation (CRR). The paper seeks stakeholder input to ensure a harmonised interpretation and application of the provision across the European Union.

The structural FX provision allows competent authorities to authorise the exclusion of FX positions that are taken deliberately to hedge against the adverse effects of exchange rate movements on capital ratios. These positions are typically of a non-trading or structural nature, often related to lending activities or other non-trading exposures.

The EBA outlines the rationale behind this treatment, highlighting that even fully matched currency positions do not guarantee a stable capital ratio due to the way capital and assets are denominated. The paper also discusses the potential inconsistencies in the application of FX risk requirements between the current CRR and the CRR2 proposal, which incorporates the Fundamental Review of the Trading Book (FRTB) framework.

Main Points

• Scope of Structural FX Provision:
  The provision is limited to positions taken deliberately to hedge FX risk on capital ratios. It applies to non-trading or structural FX positions, not to specific exposures. The exclusion is subject to ad hoc permission by competent authorities.

• Interpretation Differences:
  There are varying interpretations of the structural FX provision, both within the EU and between the CRR and Basel frameworks. The Basel Committee allows for the exclusion of items held at historic cost as structural FX positions, a provision not clearly mirrored in the CRR.

• Accounting vs. Prudential Treatment:
  The paper explores the interaction between accounting treatment (e.g., historic cost vs. fair value) and prudential FX risk requirements. It notes that non-monetary items may not change value with FX movements, yet they can still impact capital ratios through risk-weighted assets (RWAs).

• Impact on Capital Ratios:
  An illustrative example shows how capital ratios can be affected by FX movements. A bank with fully matched FX positions (Bank A) experiences a directional impact on its capital ratio, while a bank with an open FX position (Bank B) can maintain a more stable ratio through the structural FX exclusion.

• Regulatory Frameworks:
  The DP highlights the differences between the standardised and internal model approaches in terms of FX position calculation and structural FX exclusion. It suggests that the exemption should be available regardless of the approach used, as the underlying risks are considered similar.

• FRTB Integration:
  The EBA notes that the FRTB framework, introduced by the Basel Committee, has influenced the CRR2 proposal. This includes the potential inclusion of items at historic cost in the structural FX treatment.

Key Information

• Submission Deadline: Comments must be submitted by 22.09.2017 via the consultation page.
• Confidentiality: Respondents must specify whether they want their comments disclosed or kept confidential.
• Data Protection: The EBA follows Regulation (EC) No 45/2001 for data protection.
• Disclaimer: The views expressed are preliminary and do not bind the EBA in future guideline development.

Questions for Stakeholders

1. What is your current practice regarding the treatment of FX non-monetary items held at the historic FX rate? Do you include them in the overall net foreign exchange position? If so, what value do you use (historic or last FX rate)?
2. Do you agree with the EBA's view that the determination of the net FX position and structural FX exclusion should not be dependent on the approach used for calculating FX own funds requirements?

Annexes

• Annex 1: Provides illustrative examples of the theoretical implications of applying different structural FX exclusions, including the impact on individual and consolidated capital ratios.
• Annex 2: Summarises the questions posed in the DP for stakeholder feedback.

Conclusion

The DP aims to gather early feedback on current practices and interpretations of the structural FX provision, with a focus on ensuring consistency and clarity in its application. It outlines the EBA’s preliminary views and identifies areas requiring further clarification, such as the maximum size of the structural FX position and the criteria for its exclusion. The EBA also highlights the importance of governance and prudence in the assessment of FX positions, which are not covered in this paper but are essential for a comprehensive evaluation.