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EBA FRTB Forex and Commodity Risk
On Jan. 13, EBA proposed standards on non-trading book positions.
Draft regulatory technical standards (RTS) on how institutions should calculate own funds requirements for market risk of non-trading book positions subject to foreign-exchange/commodity risk under FRTB standardized/internal models approaches.
Value of Positions
Specifies the value of non-trading book positions that institutions should be using when computing their own funds requirements for market risk of those positions.
The standards require that institutions use either the last available accounting value, or the last available fair value for positions that attract foreign exchange risk.
Institutions not asked to re-value non-trading book positions attracting foreign-exchange risk daily but are required to reflect foreign-exchange component changes.
Includes calculation of own funds requirements for market risk of non-monetary items held at historical cost that may be impaired due to foreign-exchange rate changes.
Identifies the specific methodology that institutions should be using when capitalizing the foreign-exchange risk stemming from items under the standardized approach.
Institutions to model directly the risk of impairment due to changes in the relevant exchange rate where an internal model approach is used.
Outlines ad-hoc treatment regarding calculation of actual/hypothetical changes from non-trading book positions for back-testing and profit/loss attribution requirements.
Addresses issue of jumps in portfolio values that may lead to over-shootings in the back-testing not due to changes in the foreign-exchange risk component of the price.