{"id":"circulars/cssf-22-802","title":"Circular CSSF 22/802","type":"circular","date":"2022-03-18","kind":"circular","html":"

Circular CSSF 22/802 is a CSSF circular on the treatment of structural FX under Article 352(2) of Regulation (EU) No 575/2013 (EBA/GL/2020/09), published 18 March 2022 and updated 21 March 2022.

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Relevant for: Credit institutions, Investment firms.

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Keywords: Capital requirement, Internal governance, Market risk, Risk management.

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Text

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Circular CSSF 22/802 APPLICATION OF THE GUIDELINES OF THE EUROPEAN BANKING AUTHORITY ON THE TREATMENT OF STRUCTURAL FX UNDER ARTICLE 352(2) OF

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REGULATION (EU) NO 575/2013 (EBA/GL/2020/09)

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Circular CSSF 22/802 Re: Application of the Guidelines of the European Banking Authority on the treatment of structural FX under Article 352(2) of Regulation (EU) No 575/2013 (EBA/GL/2020/09)

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Ladies and Gentlemen,

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Luxembourg, 18 March 2022

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The purpose of this circular is to inform you that the CSSF, in its capacity as

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To all credit institutions

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competent authority, applies the Guidelines of the European Banking Authority

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designated as Less

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(the “EBA”) on the treatment of structural FX under Article 352(2) of Regulation

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Significant Institutions

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(EU) No 575/2013 (EBA/GL/2020/09) (the “Guidelines”), published on 01 July

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under the Single Supervisory Mechanism, to all CRR investment firms,

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  1. Consequently, the CSSF has integrated the Guidelines into its administrative practice and regulatory approach with a view to promote supervisory convergence in this field at the European level.
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and to all Luxembourg

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All the concerned institutions shall duly comply with the Guidelines.

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branches of credit institutions or CRR investment firms

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The Guidelines

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incorporated in a third country

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The Guidelines set out the criteria under which competent authorities shall authorise the exclusion of a position in a foreign currency from the calculation of its net open currency positions where such foreign currency position is of a structural nature and taken by institutions to hedge against the adverse effect of exchange rates on their capital ratios. The Guidelines are attached to this circular as an annex and are available on the EBA’s website.

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Scope of application The present circular shall apply on an individual and consolidated basis to Less Significant Institutions 1, to CRR investment firms 2 and to Luxembourg branches of credit institutions or CRR investment firms incorporated in a third country.

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“Significant supervised entities” as defined in Article 2, point 16 of Regulation (EU) No 468/2014 of the European Central Bank (ECB) of 16 April 2014 (the SSM Framework Regulation) shall refer to the relevant ECB rules, if any.

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As defined in article 1, point 9a. of the Law of 5 April 1993 on the financial sector.

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Date of application This circular shall apply with immediate effect.

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Yours faithfully,

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Françoise KAUTHEN

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Claude MARX

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Attachment:

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EBA Guidelines on the treatment of structural FX under Article 352(2) of Regulation (EU) No 575/2013 (CRR) (EBA/GL/2020/09)

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GUIDELINES ON STRUCTURAL FX

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EBA/GL/2020/09 1 July 2020

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Guidelines On the treatment of structural FX under Article 352(2) of Regulation (EU) No 575/2013 (CRR)

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GUIDELINES ON STRUCTURAL FX

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Contents 1. Executive Summary

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    Background and rationale

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    2. \n
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    Guidelines

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    Accompanying documents

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4.1

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Draft cost-benefit analysis/impact assessment

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4.2

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Feedback on the public consultation

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4.3

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Annex I: Derivation of the maximum open position

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4.4

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Annex II: stylised examples of the application of the structural FX provision

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GUIDELINES ON STRUCTURAL FX

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  1. Executive Summary The concept and specific application of the structural foreign exchange (FX) provision pursuant to Article 352(2) of Regulation (EU) No 575/2013 (the Capital Requirements Regulation, CRR) is subject to several interpretations, across both supervisory authorities and institutions. This is particularly relevant as over the last few years institutions appear to have become increasingly interested in the application of the structural FX exclusion.
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The text above is the opening of the document; the PDF carries the whole.

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Document page, PDF. Source: Commission de Surveillance du Secteur Financier (CSSF), reproduced with the CSSF's consent. The French text prevails.

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