The European Commission’s Implementing Technical Standards amending the existing Implementing Regulation on closely correlated currencies has been published in the Official Journal of the European Union. The Capital Requirements Regulation requires firms with a net foreign-exchange position in excess of 2% of its total own funds to calculate an own funds requirement for foreign exchange risk. However, firms are permitted to provide lower own funds requirements against positions in “closely correlated currencies” (i.e. currencies where the likelihood of a set loss occurring on equal and opposite positions in those currencies over the following 10 working days has a probability of at least 99%). Under CRR, the European Banking Authority is required to produce Implementing Technical Standards listing which currencies may be treated as closely correlated. In order to ensure the currency pairs remain up to date, the EBA must update the list, hence the latest amendments. Key changes include: (i) the addition of the Swiss Franc and Swedish Krona as base currencies against which closely-correlated currencies are listed; (ii) the addition of Swiss Francs, North Macedonian Denars, Polish Zloty and Swedish Krona as currencies that are closely-correlated to the Euro; and (iii) the addition of the Israeli New Shekel and Indian Rupee as currencies that are closely-correlated to the U.S. Dollar. The Regulation will enter into force on, and be directly applicable in all Member States from, December 29, 2019.

View the European Commission's amending Implementing Technical Standards.

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