Commission Delegated Regulation (EU) 2023/1577 of 20 April 2023 supplementing Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to regulatory technical standards on the calculation of the own funds requirements for market risk for non-trading book positions subject to foreign exchange risk or commodity risk and the treatment of those positions for the purposes of the regulatory back-testing requirements and the profit and loss attribution requirement under the alternative internal model approach (Text with EEA relevance)

New Commission Delegated Regulation (EU) 2023/1577 in relation to the treatment of certain non-trading book positions for purposes of calculating own funds requirements, regulatory back-testing requirements, and the profit and loss attribution requirement under the alternative internal model approach was published in the Official Journal (OJ) of the EU.
#### Specifically, the new Delegated Regulation specifies the
(1) Calculation of the own funds requirements for market risk for non-trading book positions subject to foreign exchange risk in accordance with the alternative standardised approach: In this context, the regulation notes that institutions need to use the last available accounting value of non-trading book positions subject to foreign exchange risk as the basis for calculation. The values used as the basis for calculating own funds requirements for foreign exchange risk must thereby be updated on a monthly basis. However, institutions also have the option to use the last available fair value of these positions, if they measure ALL non-trading book positions at fair value on a quarterly basis. Finally, the regulation specifies the procedure to identify the currency of denomination and defines the computation methodology for the „value of the delta foreign exchange risk sensitivity“.
(2) Calculation of the own funds requirements for market risk for non-trading book positions subject to commodity risk in accordance with the alternative standardised approach: The regulation specifies that institutions need to use the last available fair value of the positions and that the valuation must take place monthly.
(3) Calculation of the own funds requirements for market risk for non-trading book positions subject to foreign exchange risk in accordance with the alternative internal model approach: When using the alternative internal model approach, institutions must – similar to the situation when they use the alternative standardized approach – use the last available accounting value of non-trading book positions subject to foreign exchange risk as the basis for calculation, unless they apply the fair value to all of their non-trading book positions. The values used as the basis for calculating own funds requirements for foreign exchange risk must thereby be updated on a daily basis, regardless of whether or not the fair value or accounting value are used. Also, institutions are required to account for exchange rate-related impairment risks. Finally, the regulation defines how the expected shortfall risk measure and the stress scenario risk measure shall be derived.
(4) Calculation of the own funds requirements for market risk for non-trading book positions subject to commodity risk or both to commodity and foreign exchange risk in accordance with the alternative internal model approach: The regulation specifies that institutions need to use the last available fair value of the positions and that the valuation must take place daily. At last, the regulation defines how the expected shortfall risk measure and the stress scenario risk measure shall be derived.
(5) Computation of the hypothetical and actual changes in the value of the portfolio related to non-trading book positions subject to foreign exchange risk or commodity risk or both to commodity and foreign exchange risk in accordance with Article 325bf and Article 325bg of Regulation (EU) No 575/2013:* According to the regulation the value of these changes for positions subject to foreign exchange risk must be determined at the end of the day following the computation of the value-at-risk (VaR) using the previous day’s values and only updating „the component reflecting the foreign exchange risk of that position“. Similarly, the value of these changes for positions subject to foreign exchange risk, commodity risk, or both must be determined at the end of the day following the computation of the value-at-risk (VaR) using the previous day’s values and only updating „the component reflecting the foreign exchange and commodity risk“. However, institutions may opt to update ALL* components