EBA consults on draft ITS on closely correlated currencies and on appropriately diversified indices

25 June 2013

EBA published two consultation papers on draft ITS on: 1) closely correlated currencies; and 2) appropriately diversified indices. Both consultations run until 8 September, 2013.

The EBA published two consultation papers on draft ITS to identify:

• a list of relevant closely correlated currencies for the purposes of calculating the capital requirements for foreign-exchange risk; and
• a list of relevant appropriately diversified indices for the purposes of calculating the capital requirements for equity risk.

Draft ITS on closely correlated currencies

These draft ITS provide a list of relevant closely correlated currencies. Currencies are considered to be closely correlated if they meet the specific criteria set out in Article 354 of the Capital Requirements Regulation (CRR). Positions in currency pairs that are deemed to be closely correlated are subject to lower capital requirements.

Each one of the currency pairs assessed by the EBA is the result of a combination between a list of 11 EU and 37 non-EU currencies. The EBA expects to update this list on a yearly basis incorporating any additional relevant currencies as well as the latest available market data. Furthermore, these ITS envisage the possibility of an exceptional and urgent update of the list when market developments require such a review.

The EBA is requested to submit the final draft ITS on closely correlated currencies to the European Commission by 1 January, 2014.

Draft ITS on appropriately diversified indices

These draft ITS list relevant exchange traded and appropriately diversified indices for which specific risk incorporated in a stock index can be ignored. The list is based on the following criteria:

• Number: the index must comprise a minimum number of equities;
• Concentration: None of the equities or concentration of equities must significantly influence the volatility of the index;
• Diversification: the index must comprise equities that are diversified both from a geographical and economical perspective.

The EBA is requested to submit the final draft ITS on appropriately diversified indices to the European Commission by 1 January, 2014.

Full information

Draft Implementing Technical Standards (ITS) on closely correlated currencies

Draft Implementing Technical Standards (ITS) on appropriately diversified indices

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