EBA consultation non-trading book positions under FRTB: EBF response

EBA consultation non-trading book positions under FRTB: EBF response

Brussels, 2 July 2020 – The EBF has responded to the consultation paper on draft RTS on the treatment of non-trading book positions subject to foreign-exchange (FX) risk or commodity risk of the European Banking Authority (EBA). The EBF welcomes the opportunity to provide comments and would like to draw attention to the following key concerns:

• The EBF supports the EBA proposal to grant the opportunity to institutions to use accounting values or alternatively fair values as a basis for computing the own funds requirements for foreign exchange risk.
• The EBF supports the EBA proposal to revalue only the FX component of banking book instruments, which reflects common industry practice. However, institutions should not be required to perform this revaluation on a daily basis, as this is not in line with common industry practice. A daily revaluation would represent a significant operational burden for some institutions with no clear added value.
• The EBF recognises the importance of appropriate treatment of non-trading positions subject to FX risk. Therefore, the EBF would be pleased to contribute to the development of a more simple, effective, and meaningful regulatory framework. However, the proposed methodology for capturing the foreign-exchange risk stemming from non-monetary items at a historical cost under the standardised approach as it would lead to an undue Pillar 1 capital charge related to investments in subsidiaries at solo level unless a waiver is granted
• The EBF supports the use of internal models with respect to the valuation of FX and commodity positions, as long as sufficient data are available

FOR MORE INFORMATION:     

Lukas Bornemann, Prudential Policy and Supervision, l.bornemann@ebf.eu