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.
  • Prudential Treatment
  • 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.
  • Ad-hoc Treatment
  • 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.
  • Effectiveness
  • Deadline for responses is Apr. 10, 2020.

Regulators EU EBA
Entity Types Auditor; B/D; Bank
Reference PR, CP EBA-CP-2020-01, RTS, 1/13/2020; FRTB
Functions Accounting; Financial; Reporting; Risk; Trade Reporting; Trading; Treasury
Countries European Union
Products Banking; Commodities; Forex
Regions EMEA
Rule Type Proposed
Rule Date 1/13/2020
Effective Date 4/10/2020
Rule Id 70226
Linked to
Reg. Last Update 1/13/2020
Report Section EU

Last substantive update on 01/14/2020