Article 104c
Treatment of foreign exchange risk hedges of capital ratios
1.
An institution which has deliberately taken a risk position in order to hedge, at least partially, against adverse movements in foreign exchange rates on any of its capital ratios as referred to in Article 92(1), points (a), (b) and (c), may, subject to the permission of its competent authority, exclude that risk position from the own funds requirements for foreign exchange risk referred to in Article 325(1), provided that all of the following conditions are met:
(a)
the maximum amount of the risk position that is excluded from the own funds requirements for market risk is limited to the amount of the risk position that neutralises the sensitivity of any of the capital ratios to the adverse movements in foreign exchange rates;
(b)
the risk position is excluded from the own funds requirements for market risk for at least six months;
(c)
the institution has established an appropriate risk management framework for hedging the adverse movements in foreign exchange rates on any of its capital ratios, including a clear hedging strategy and governance structure;
(d)
the institution has provided to the competent authority a justification for excluding a risk position from the own funds requirements for market risk, the details of that risk position and the amount to be excluded.
2.
Any exclusion of risk positions from the own funds requirements for market risk in accordance with paragraph 1 shall be applied consistently.
3.
The competent authority shall approve any changes by the institution to the risk management framework referred to in paragraph 1, point (c), and to the details of the risk positions referred to in paragraph 1, point (d).
4.
EBA shall develop draft regulatory technical standards to specify:
(a)
the risk positions that an institution can deliberately take in order to hedge, at least partially, against the adverse movements of foreign exchange rates on any of its capital ratios referred to in paragraph 1;
(b)
how to determine the maximum amount referred to in paragraph 1, point (a), of this Article and the manner in which an institution is to exclude that amount for each of the approaches referred to in Article 325(1);
(c)
the criteria to be met by an institution’s risk management framework referred to in paragraph 1, point (c), in order to be considered appropriate for the purposes of this Article.
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2026.
Power is delegated to the Commission to supplement this Regulation by adopting regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.