Recital 1

(1)The size of the business constitutes a proxy for the degree of sophistication that institutions should have in their capital calculations. To determine whether institutions are allowed to use simplified methods for the calculation of own funds requirements for market and counterparty credit risks, they are required to calculate the size of the on- and off-balance-sheet business in accordance with Article 94(1), Article 273a(1) and (2), and Article 325a(1) of Regulation (EU) No 575/2013. The identification of the main risk driver of a position and, on that basis, the determination of whether a transaction represents a long or a short position, are fundamental for the correct calculation of the size of the business. Given the importance of those calculations for small and non-complex institutions, the method for identifying the main risk driver of a position and for determining whether a transaction represents a long or a short position should be proportionate to the degree of complexity of the institution.