Commission Delegated Regulation (EU) 2023/1577 of 20 April 2023 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards on the calculation of the own funds requirements for market risk for non-trading book positions subject to foreign exchange risk or commodity risk and the treatment of those positions for the purposes of the regulatory back-testing requirements and the profit and loss attribution requirement under the alternative internal model approach (Text with EEA relevance)
Calculation of the own funds requirements for market risk for non-trading book positions subject to foreign exchange risk in accordance with the alternative standardised approach
1. When calculating the own funds requirements for non-trading book positions subject to foreign exchange risk under the sensitivities-based method in accordance with Part Three, Title IV, Chapter 1a, Section 2, of Regulation (EU) No 575/2013, institutions shall use as a basis the last available accounting value of those positions.
2. By way of derogation from paragraph 1, institutions may use the last available fair value of a non-trading book position that is subject to foreign exchange risk, provided that they measure all their non-trading book positions at fair value at least on a quarterly basis. When using this derogation, institutions shall apply it consistently to all non-trading book positions subject to foreign exchange risk.
3. Institutions shall update the last available value that is used as a basis for calculating the own funds requirements for foreign exchange risk in accordance with paragraphs 1 and 2 at least on a monthly basis, by reflecting the changes in the value of the foreign exchange risk factors.
4. Institutions shall identify the currency of denomination of the item as the foreign currency whose depreciation against their reporting currency would lead to the highest impairment of the item, where all of the following conditions are met:
(a)
the item is not measured at fair value;
(b)
the item is subject to the risk of impairment due to foreign exchange risk;
(c)
the accounting value of the item is not updated at each reporting date to reflect the changes in the exchange rate between the foreign currency and the reporting currency.
Where institutions calculate the own funds requirements for market risk on a consolidated basis, they shall identify the currency of denomination of an item as the reporting currency of the institution which recognises that item in its individual financial statement, where all of the following conditions are met:
(a)
the item is not measured at fair value;
(b)
the item is subject to the risk of impairment due to foreign exchange risk;
(c)
the institution’s reporting currency differs from the reporting currency of the institution that recognises the item in its individual financial statement;
(d)
the accounting value of the item is not updated at each reporting date to reflect the changes in the exchange rate between the foreign currency and the reporting currency of the institution recognising the item in its individual financial statement.
5. The value of the delta foreign exchange risk sensitivity calculated in accordance with Article 325r(5) of Regulation (EU) No 575/2013 corresponding to the items referred to in paragraph 4 of this Article shall be equal to the value which those items have in the currency of denomination identified in accordance with that paragraph, multiplied by the spot exchange rate between the currency of denomination and the institution’s reporting currency.
Calculation of the own funds requirements for market risk for non-trading book positions subject to commodity risk in accordance with the alternative standardised approach
When calculating the own funds requirements for non-trading book positions subject to commodity risk under the sensitivities-based method in accordance with Part Three, Title IV, Chapter 1a, Section 2, of Regulation (EU) No 575/2013, institutions shall use as a basis the latest available fair value of those positions.
Institutions shall measure those positions at fair value at least on a monthly basis.
Calculation of the own funds requirements for market risk for non-trading book positions subject to foreign exchange risk in accordance with the alternative internal model approach
1. When calculating the own funds requirements for non-trading book positions subject to foreign exchange risk in accordance with the alternative internal model approach set out in Part Three, Title IV, Chapter 1b, of Regulation (EU) No 575/2013, institutions shall use as a basis the last available accounting value of those positions.
2. By way of derogation from paragraph 1, institutions may use the last available fair value of a non-trading book position that is subject to foreign exchange risk, provided that they measure all their non-trading book positions at fair value at least on a quarterly basis. When using this derogation, the institutions shall apply it consistently to all non-trading book positions subject to foreign exchange risk.
3. Institutions shall update the last available value that is used as a basis for calculating the own funds requirements for foreign exchange risk in accordance with paragraphs 1 and 2 on a daily basis, by reflecting changes in the value of the foreign exchange risk factors.
4. When updating the last available value of a non-trading book position on a daily basis, institutions shall update the value of all risk factors for a position for which they used the derogation laid down in Article 5(1), second subparagraph.
5. When calculating the expected shortfall risk measure referred to in Article 325bb of Regulation (EU) No 575/2013 and the stress scenario risk measure referred to in Article 325bk of that Regulation in relation to non-trading book positions subject to foreign exchange risk, institutions shall apply scenarios of future shocks or extreme scenarios of future shock, respectively, only to risk factors that belong to the foreign exchange broad risk factor category referred to in Article 325bd(1) of that Regulation.
6. Institutions shall capture in their risk-measurement model the risk of impairment due to changes in the relevant exchange rates posed by items that are subject to that risk, where those items are not measured at fair value and their accounting values are not updated at each reporting date to reflect the changes in the exchange rate between the foreign currency and the reporting currency of the institution recognising the item in its individual financial statement.
Calculation of the own funds requirements for market risk for non-trading book positions subject to commodity risk or both to commodity and foreign exchange risk in accordance with the alternative internal model approach
1. When calculating the own funds requirements for non-trading book positions subject either to commodity risk or both to commodity and foreign exchange risk in accordance with the alternative internal model as set out in Part Three, Title IV, Chapter 1b, of Regulation (EU) No 575/2013, institutions shall use as a basis the last available fair value of those positions. Institutions shall measure those positions at fair value on a daily basis.
2. In relation to non-trading book positions subject to commodity risk only, when calculating the expected shortfall risk measure referred to in Article 325bb of Regulation (EU) No 575/2013 or the stress scenario risk measure referred to in Article 325bk of that Regulation, institutions shall apply scenarios of future shocks or extreme scenarios of future shock, respectively, only to risk factors that belong to the commodity broad risk factor category referred to in Article 325bd(1) of that Regulation.
3. In relation to non-trading book positions subject to commodity risk and foreign exchange risk, when calculating the expected shortfall risk measure referred to in Article 325bb of Regulation (EU) No 575/2013 or the stress scenario risk measure referred to in Article 325bk of that Regulation, institutions shall apply scenarios of future shocks or extreme scenarios of future shock, respectively, to the risk factors that belong to the commodity or foreign exchange broad risk factor categories referred to in Article 325bd(1) of that Regulation.
Computation of the hypothetical and actual changes in the value of the portfolio related to non-trading book positions subject to foreign exchange risk or commodity risk or both to commodity and foreign exchange risk in accordance with Article 325bf and Article 325bg of Regulation (EU) No 575/2013
1. By way of derogation from Articles 1 to 4 of Delegated Regulation (EU) 2022/2059, institutions calculating the hypothetical and the actual changes in the value of the portfolio referred to in Articles 325bf and 325bg of Regulation (EU) No 575/2013 in relation to a non-trading book position which is subject to foreign exchange risk shall calculate the value of that non-trading book position at the end of the day following the computation of the value-at-risk number referred to in Article 325bf of that Regulation by using the value of that non-trading book position at the end of the previous day and updating the component reflecting the foreign exchange risk of that position.
Where the value of a non-trading book position does not change linearly with movements in an exchange rate to which it is subject, institutions may calculate the value of that non-trading book position at the end of the day following the computation of the value-at-risk number referred to in Article 325bf of Regulation (EU) No 575/2013 by using the value of that non-trading book position at the end of the previous day and updating all the components the institution uses to value that non-trading book position.
When applying the second subparagraph, institutions shall apply it consistently to all positions in the trading desk that do not change linearly with movements in an exchange rate to which those positions are subject.
2. By way of derogation from Articles 1 to 4 of Delegated Regulation (EU) 2022/2059, institutions calculating the hypothetical and the actual changes in the value of the portfolio referred to in Articles 325bf and 325bg of Regulation (EU) No 575/2013 in relation to a non-trading book position which is subject to commodity risk or both to commodity and foreign exchange risk shall calculate the value of that non-trading book position at the end of the day following the computation of the value-at-risk number referred to in Article 325bf of that Regulation in accordance with one of the following methods:
(a)
institutions shall use the value of that non-trading book position at the end of the previous day and update only the components reflecting the foreign exchange and commodity risk;
(b)
institutions shall use the value of that non-trading book position at the end of the previous day and update all the components the institution uses to value that non-trading book position.
When applying the first subparagraph, institutions shall apply it consistently for all positions subject to commodity risk in the trading desk.
3. Institutions shall apply paragraphs 1 and 2 only to non-trading book positions that are included both in the portfolio on the day of the computation of the value-at-risk number referred to in Article 325bf of Regulation (EU) No 575/2013, and in the portfolio on the day following the computation of that value-at-risk number.
Entry into force
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union .
Source: EUR-Lex (Publications Office of the EU), © European Union, reuse permitted under Commission Decision 2011/833/EU.
