Question
In the context of article 352.2, when there is an investment in a subsidiary denominated in foreign currency and this subsidiary has invested in other subsidiary denominated in the same foreign currency must this exposure be always exempted from capital requirements calculation?
Background on the question
EBA explains in EBA Guidelines on the treatment of structural FX under Article 352(2) of Regulation (EU) No 575/2013 (CRR) page 97 example 7 a case where a company invests in a company denominated in a foreign currency, and the guidelines determine that the maximum open position must be 0 because the CET1 of the institution is not sensitive to changes in the FX rate. Following this criteria, in the case of a subsidiary which invest into another subsidiary denominated in foreign currency which is the currency of its main operations must be the same conclusion, the net open positions must be 0. For example: Parent co is denominated in EUR and invests in subsidiary A which is denominated in USD. Subsidiary A invests in subsidiary B which is also denominated in USD. Parent co Monetary Assets in EUR 30.000 Historical Assets in USD subsidiary A 1.000 Monetary Liabilities in EUR 28.000 CET1 in EUR 3.000 Subsidiary A Monetary Assets in USD 10.000 Historical Assets in USD subsidiary B 1.000 Monetary Liabilities in USD 10.000 CET1 in USD 1.000 Subsidiary B Monetary Assets in USD 4.000 Monetary Liabilities in USD 3.000 CET1 in USD 1.000
Answer
This question has been rejected because the issue it raises is not material i.e. it does not raise a prudential, payments, consumer protection, resolution or other regulatory issue that is within the EBA’s remit.The Single Rule Book Q&A tool has been established to provide explanations and non-binding interpretations on questions relating to the practical application or implementation of the provisions of legislative acts referred to in Article 1(2) of the EBA’s founding Regulation, as well as associated delegated and implementing acts, and guidelines and recommendations, adopted under these legislative acts.For further information on the purpose of this tool and on how to submit questions, please see “Additional background and guidance for asking questions”.