(1)

Considering the different value measures applicable for non-trading book positions, it is necessary to specify whether institutions should use the accounting value or the fair value of those positions as a basis to calculate, in accordance with the alternative standardised approach or the alternative internal model approach set out in Part Three, Title IV, Chapter 1a and Chapter 1b, respectively, of Regulation (EU) No 575/2013, the own funds requirements for market risk for non-trading book positions subject to foreign exchange risk, commodity risk or both.

(2)

Since the value of non-trading book positions is not driven only by market risk factors, institutions should not be required to perform a daily valuation of those positions for the calculation of own funds requirements for foreign exchange risk under the alternative standardised approach. Instead, institutions should reflect in the value of those positions used as a basis for calculation only those changes that are associated with the foreign exchange risk components of those positions.

(3)

To ensure consistency with accounting practices, institutions should use the last available accounting value of a non-trading book position as a basis for calculating the own funds requirement for foreign exchange risk in accordance with the alternative standardised approach. However, the fair value of those positions is also deemed an appropriate basis for the calculation of the own funds requirements. Therefore, institutions should be allowed to use the fair value instead of the last available accounting value as a basis for that calculation if they measure all their non-trading book positions at fair value at least quarterly.

(4)

In order to limit any potential misrepresentation of the foreign exchange risk in the non-trading book, the frequency at which institutions are required to update the basis used to reflect the changes in the foreign exchange risk factors should be monthly. That frequency is proportionate, in particular compared to the daily frequency at which institutions are required to update the foreign exchange risk factors under the alternative internal model approach.

(5)

Considering that some foreign exchange positions in the non-trading book might stem from non-monetary items whose value is not updated at each reporting date to reflect changes in the exchange rate, it is necessary to lay down a specific treatment to harmonise the calculation of the own funds requirements for foreign exchange risk for those items in accordance with the sensitivity-based method laid down in Part Three, Title IV, Chapter 1a, Section 2, of Regulation (EU) No 575/2013.

(6)

In line with the international accounting standards, institutions are in general required to measure their financial instruments bearing commodity risk at fair value for the calculation of own funds requirements. However, where an institution physically holds a commodity and does not use the fair value of that position for accounting purposes, the fair value of that position should be used as a basis for calculating the own funds requirements for market risk, since it ensures an accurate and simple implementation of the alternative standardised approach. In addition, using the fair value as a basis allows institutions to accurately recognise hedges and diversification effects between the positions that are held in the non-trading book and those held in the trading book. That basis should be updated monthly, thereby ensuring a proportionate approach, in particular compared with the daily frequency at which institutions are required to update the commodity risk factors under the alternative internal model approach.

(7)

The overarching regulatory framework for the valuation of positions in the non-trading book subject to foreign exchange or commodity risk under the alternative internal model approach should be aligned to the regulatory framework under the alternative standardised approach, considering that there could be trading desks the positions of which are capitalised using the alternative standardised approach in one quarter and the alternative internal model approach in another quarter. However, it is necessary to lay down that, differently from the alternative standardised approach, the alternative internal model approach requires the calculation of daily figures.

(8)

For the purposes of the back-testing and the profit and loss attribution requirement as set out in Articles 325bf and 325bg of Regulation (EU) No 575/2013 under the alternative internal model approach, it is necessary to specify how institutions are to calculate actual and hypothetical changes in the value of the portfolio, specifically in relation to the value of their non-trading book positions. Therefore, to address specific characteristics of non-trading book positions subject to foreign exchange risk or commodity risk, it is necessary to specify how Commission Delegated Regulation (EU) 2022/2059 (2) should be applied for those positions.

(9)

In order to ensure consistency with the scope of risks captured in the risk-measurement model, the actual and hypothetical changes in the value of the portfolio should generally only reflect the changes related to market risk factors. However, as it could be challenging to isolate changes related to foreign exchange and commodity risk for non-trading book positions subject to commodity risk and non-trading book positions that do not change linearly with movements in the exchange rate, institutions should be allowed to reflect in the actual and hypothetical changes in the value of the portfolio the changes related to all components determining the value of those non-trading book positions.

(10)

The provisions in this Regulation are closely linked, since they all deal with the treatment of non-trading book positions that are subject to foreign exchange risk, commodity risk, or both. To ensure coherence between those provisions, which should enter into force at the same time, and to facilitate access and a comprehensive view of those provisions by persons subject to the obligations set out therein, it is appropriate to include all those provisions in a single Regulation.

(11)

This Regulation is based on the draft regulatory technical standards submitted to the Commission by the European Banking Authority.

(12)

The European Banking Authority has conducted open public consultations on the draft regulatory technical standards on which this Regulation is based, analysed the potential related costs and benefits and requested the advice of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU) No 1093/2010 of the European Parliament and of the Council (3),