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)

Article 1

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

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.

Article 2

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.

Article 3

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

Article 4

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

Article 5

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

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.

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.

Article 6

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.

This Regulation shall be binding in its entirety and directly applicable in all Member States.