The EBA consults on draft technical standards for structural foreign exchange positions

The European Banking Authority (EBA) launched today a public consultation on its draft Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS) on structural foreign exchange (FX), under the Capital Requirements Regulation (CRR). These standards will contribute to provide further clarity and consistency to the structural FX provision across the EU. The consultation runs until 7 February 2025.

The proposed RTS largely follow the existing EBA Guidelines on this topic, but introduce several key changes to enhance clarity and consistency, including:

• Quantitative thresholds: a clear threshold for a currency to be eligible for structural FX treatment, aiming to reduce variability across institutions in identifying relevant currencies.
• Maximum open position computation: allowing banks to consider only credit risk own funds requirements when determining the position neutralising sensitivity to capital ratios, where credit risk drives ratio variability.
• Clarifications on risk positions: further details on how institutions should remove FX risk positions from own funds requirements.
• Policies for illiquid currencies: special provisions for currencies that are illiquid in the market, for instance, due to Union restrictive measures.

The ITS, on the other hand, propose a template for reporting information linked to the Structural FX waiver, and support the monitoring of the Structural FX waiver on an on-going basis.

Consultation process

​Comments to this consultation can be sent to the EBA by clicking on the "Send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 7 February 2025. All contributions received will be published following the close of the consultation, unless requested otherwise.

​A public hearing will take place in the form of a webinar on 3 December 2024, 14:00 – 15:00 CET. The EBA invites interested stakeholders to register using this link by 28 November 2024, 18:00 CET. The dial-in details will be communicated to the registered participants after the registration deadline.

​Legal basis and background

Article 104c of Regulation (EU) No 575/2013 (Capital Requirements Regulation - CRR), mandates the EBA to develop draft RTS specifying (a) the risk positions that an institution can deliberately take in order to hedge, at least partially, against the adverse movements of foreign exchange rates on any of an institution’s capital ratios; (b) how to determine the maximum amount that can be waived, and the manner in which an institution shall exclude this amount for each of the approaches set out in Article 325(1) CRR; (c) the criteria that shall be met by an institution’s risk management framework in order to be considered appropriate as regards the treatment of Structural FX positions.

The structural FX provision has been subject to varying interpretations across jurisdictions and institutions. To address these discrepancies and ensure a harmonised application within the EU, in 2020, the EBA published Guidelines on implementing this provision.