This regulation amends Implementing Regulation (EU) 2015/2197 regarding closely correlated currencies by updating the list of these currencies to reflect their current correlation. The data used for this update is based on a three and five-year time series, ending on March 31, 2025. The changes made do not significantly alter the substantive content but merely apply an existing methodology to revised data.
This document is a draft implementing regulation of the European Commission dated 2026, amending Implementing Regulation (EU) 2015/2197 concerning closely correlated currencies, pursuant to Regulation (EU) No 575/2013 of the European Parliament and of the Council. It is a technical update concerning the list of closely correlated currency pairs, based on data up to March 31, 2025. The scope covers prudential requirements for credit institutions in the European Union and the European Economic Area (p. 1-3).
The document addresses the update of implementing technical standards regarding closely correlated currencies, used within the framework of the European prudential regulation (Regulation (EU) No 575/2013). This update aims to ensure that the list of currency pairs accurately reflects the actual correlations observed in the markets, based on three- and five-year data series ending March 31, 2025. The importance of this subject lies in the need to ensure the relevance and reliability of prudential rules applied to financial institutions, notably for calculating capital requirements related to foreign exchange risks. The main finding is that the existing methodology is maintained, without substantial change, but applied to a new updated data series. The conclusions indicate that the list of closely correlated currencies is modified accordingly, and that this change will take effect twenty days after publication in the Official Journal of the European Union. The European Commission adopts this regulation based on technical drafts submitted by the EBA, which did not deem it necessary to conduct a public consultation or cost-benefit analysis, considering the impact limited. The implicit recommendation is to apply this update to maintain regulatory compliance and accuracy of prudential calculations (p. 1-3).
This implementing regulation aims to update the list of closely correlated currencies used within the framework of the European prudential regulation applicable to credit institutions. The issue is to ensure that this list reflects the actual correlations between currencies, which is essential for calculating capital requirements related to foreign exchange risk. The objective is to update this list using recent data, covering three- and five-year periods up to March 31, 2025, in accordance with the methodology defined in Regulation (EU) 2015/2197. This update does not modify the methodological principles but adapts the list to developments in foreign exchange markets. The scope is limited to currencies concerned by European prudential regulation, without substantial changes to the rules. The limitations include the absence of cost-benefit analysis and public consultation, justified by the technical and limited nature of the modification (p. 1-3).
Update of closely correlated currencies:
- The list of closely correlated currency pairs is updated based on market data up to March 31, 2025.
- This update relies on the analysis of three- and five-year time series, in accordance with the methodology defined in Regulation (EU) 2015/2197.
- The objective is to ensure that the selected pairs still reflect a significant correlation, essential for calculating prudential requirements related to foreign exchange risk (p. 2).
Methodology and regulatory framework:
- The regulation is based on Regulation (EU) No 575/2013, notably Article 354(3), and on implementing technical standards established by the EBA.
- The EBA submitted a draft technical standard to the Commission, which adopted the amendment without public consultation or cost-benefit analysis, considering the impact limited and the approach proportionate.
- The update is a continuous application of the existing methodology, without substantial rule changes (p. 2).
Entry into force and legal scope:
- The regulation amends the annex of Regulation (EU) 2015/2197 by replacing the list of closely correlated currencies.
- It enters into force twenty days after its publication in the Official Journal of the European Union.
- It is directly applicable and binding in all Member States of the European Union and the European Economic Area (p. 3).
Established facts:
- The list of closely correlated currencies has been updated based on data up to March 31, 2025.
- The methodology used is that defined in Regulation (EU) 2015/2197, based on correlation analysis over three and five years.
Assumptions:
- The correlation between currencies observed over these periods is representative of future risks.
- The absence of public consultation and cost-benefit analysis is justified by the limited impact of the amendment.
Interpretations:
- The update ensures the relevance of prudential requirements regarding foreign exchange risk.
- Maintaining the methodology guarantees regulatory continuity and legal stability.
Uncertainties:
- The document does not detail the modified currency pairs nor the precise correlation thresholds retained.
- The concrete impact on institutions’ capital requirements is not quantified (p. 1-3).
The author concludes that updating the list of closely correlated currencies is necessary to maintain regulatory compliance and accuracy of prudential calculations. The regulation amends the annex of Regulation (EU) 2015/2197 by replacing the currency list according to data as of March 31, 2025. This modification is a simple technical update without substantial rule changes. The European Commission adopts this regulation, which will enter into force twenty days after publication, and will be directly applicable in all Member States. No additional measures or public consultation are planned, considering the impact limited. It is therefore recommended that financial institutions take this update into account in their foreign exchange risk calculations to remain compliant (p. 1-3).
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