European Banking Authority publishes final draft technical standards harmonising treatment of structural foreign exchange positions under the Capital Requirements Regulation

The European Banking Authority published final draft Regulatory Technical Standards (RTS) on structural foreign exchange (FX) under the Capital Requirements Regulation (CRR), aiming to improve consistency and supervisory convergence in how structural FX provisions are applied across the EU. The RTS broadly retain the approach in the EBA’s existing Guidelines while introducing targeted enhancements to support a more harmonised and transparent framework. The RTS specify how institutions may determine the maximum open position that can be exempted, including permitting institutions, where credit risk is the main driver of capital ratio variability, to consider only credit risk own funds requirements when calculating the position that neutralises sensitivity to capital ratios. Further guidance clarifies how institutions should remove FX risk positions from own funds requirements and introduces dedicated provisions for illiquid currencies, including currencies affected by Union restrictive measures. The standards also cover the types of risk positions that may be taken to hedge adverse FX movements on capital ratios, how to determine and exclude the maximum amount that can be waived under the approaches in Article 325(1) CRR, and criteria for an appropriate risk management framework. The EBA has adopted the final draft technical standards and submitted them to the European Commission.