Question ID
2023_6758
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
ARTICLE 27(b)
Type of submitter
Credit institution
Subject matter
QUALIFICATION OF INVESTMENT IN FOREIGN TRADING SUBSIDIARY
Question

Could the EBA confirm that a long position in foreign currency, say in USD (while the Bank’s reporting currency is EUR), stemming only from the Bank’s investment in a trading subsidiary in the US, can be qualified as structural?

Background on the question

Let’s assume that a subsidiary reporting in USD:

  • has invested fully its equity in trading book business, and that such business is made exclusively in USD and does not create any FX position locally; and
  • has no banking book transactions with external counterparts.

Hypothetical balance sheet of the US subsidiary:

Value in cv EUR

Value in cv EUR

Assets in USD (TB)

100

CET1 in USD

100

Hypothetical balance sheet of the mother company:

Value in cv EUR

Value in cv EUR

Investment in the subsidiary in USD (BB)

100

Assets in EUR (BB)

900

CET1 in EUR

1 000

Hypothetical balance sheet of the consolidated Group:

Value in cv EUR

Value in cv EUR

Assets in USD (TB)

100

Assets in EUR (BB)

900

CET1 in EUR

1 000

The investment in such subsidiary creates a long USD position at Group level of cv EUR100.

It should be considered that this long USD position can be qualified as structural, according to article 27 (b) of the EBA Guidelines:

“The following positions should be considered as positions of a structural nature:

(…)

(b) where the institution requesting the permission referred to in Article 352(2) of Regulation (EU) No575/2013 applies the requirements of that Regulation on a consolidated basis, a position for which both of the following conditions are met:

(i) it stems from an investment in a subsidiary that has been included in the consolidation;

(ii) the currency of the position coincides with the reporting currency used by the subsidiary holding the item to which such position corresponds.”

Submission date
Rejected publishing date
Rationale for rejection

This question has been rejected because it is considered that EBA guidance or clarification is not needed with regard to the issue that it raises. For example, this can be the case where it is considered that the existing regulatory framework is sufficiently clear and unambiguous, or where different practices may be possible but it is not currently necessary to harmonise these further through the Q&A process.

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Status
Rejected question