Date: 2025-05-08Category: Not ApplicableState: Union GovernmentCountry: Europe
Commission Delegated Regulation (EU) 2025/878 of 3 February 2025 amending the regulatory technical standards laid down in Delegated Regulation (EU) 2022/2059, Delegated Regulation (EU) 2022/2060 and Delegated Regulation (EU) 2023/1577 as regards the technical details of back-testing and profit and loss attribution requirements, the criteria for assessing the modellability of risk factors, and the treatment of foreign-exchange risk and commodity risk in the non-trading book
## Report on Commission Delegated Regulation (EU) 2025/878
**1. Executive Summary:**
This report analyzes Commission Delegated Regulation (EU) 2025/878, an amendment to several existing regulations: Delegated Regulation (EU) 2022/2059, Delegated Regulation (EU) 2022/2060, and Delegated Regulation (EU) 2023/1577. The core purpose of this amendment is to refine and clarify the technical details of backtesting and profit and loss attribution requirements, the criteria for assessing the modellability of risk factors, and the treatment of foreign exchange risk and commodity risk in the non-trading book. Key findings indicate that the amendments aim to align with BCBS international standards, provide greater clarity to competent authorities, and ensure that institutions have clear internal policies regarding the management of non-trading book positions.
**2. Introduction:**
The purpose of this report is to provide an informative overview of Commission Delegated Regulation (EU) 2025/878, based solely on the content of the provided text. This report will analyze the amendment's objectives, key changes, target audience, implementation aspects, and expected outcomes.
**3. Policy Overview:**
* This is an *amendment* to the following existing regulations:
* Commission Delegated Regulation (EU) 2022/2059
* Commission Delegated Regulation (EU) 2022/2060
* Commission Delegated Regulation (EU) 2023/1577
* **Core Objective(s) as stated or inferred from the provided text:**
* To align with BCBS (Basel Committee on Banking Supervision) international standards.
* To provide greater clarity regarding the classification of trading desks based on the relationship between theoretical and hypothetical changes in portfolio value (Green, Yellow, Orange, and Red zones).
* To support competent authorities in assessing the use of third-party vendor data for modellability of risk factors.
* To ensure clarity on the calculation of own funds requirements for market risk in relation to non-trading book positions, including the identification of foreign exchange positions related to translation risk.
**4. Background and Rationale:**
This amendment is likely driven by the need to reflect amendments introduced in Union law by Regulation (EU) 2024/1623, which implemented remaining BCBS requirements and clarified existing requirements regarding prudential requirements for credit institutions. Specifically, the amendment addresses the classification of trading desks, the assessment of modellability of risk factors when using third-party data, and the treatment of foreign exchange and commodity risks in the non-trading book. The text indicates a drive for clearer alignment with international standards and addressing perceived gaps or ambiguities in the existing regulations.
**5. Key Provisions / Changes:**
This section details the changes introduced by the amendment.
* **Amendment to Delegated Regulation (EU) 2022/2059:**
* **Change:** Modifies Article 6(1) to specify the calculations institutions must undertake.
* **Change:** Article 9 is amended to classify trading desks as green, orange, yellow or red zone desks and define these classifications.
* **Change:** Replaces Article 10, outlining the calculation of the additional own funds requirement. This replaces and redefines the PLA k.
* **Change:** Deletes Article 16, removing the aggregation formula (which the text notes is now laid down in Article 325ba3 of Regulation EU No 575/2013). This simplifies Delegated Regulation EU 2022/2059 by removing a redundant element.
* **Amendment to Delegated Regulation (EU) 2022/2060:**
* **Change:** Deletes Article 2, paragraph 4.
* **Change:** Adds a subparagraph to Article 71 requiring documentation for each third-party vendor whose data is used to classify risk factors as modellable, including the number of risk factors classified as modellable and a materiality assessment. This enhances transparency and auditability concerning the use of third-party data.
* **Amendment to Delegated Regulation (EU) 2023/1577:**
* **Change:** Adds paragraph 6 to Article 1, requiring institutions to identify positions included in foreign exchange risk exposure due to translation risk when calculating own funds requirements on a consolidated basis. This improves risk management by ensuring that institutions can differentiate translation risk from other foreign exchange risks.
* **Change:** Adds paragraphs 7 and 8 to Article 3, requiring documentation of internal policies regarding the assignment of non-trading book positions subject to foreign exchange risk to trading desks. This ensures clear lines of responsibility and a documented rationale for assignment decisions.
* **Change:** Adds paragraph 4 to Article 4, requiring documentation of internal policies regarding the assignment of non-trading book positions subject to commodity risk (or both commodity and foreign exchange risk) to trading desks. Similar to the changes in Article 3, this promotes clarity and accountability in risk management.
**6. Target Audience and Stakeholders:**
Based on the text, the primary target audience and stakeholders are:
* Credit institutions subject to Regulation (EU) No 575/2013 (CRR - Capital Requirements Regulation).
* Trading desks within those institutions.
* Competent authorities responsible for supervising these institutions.
* Third-party vendors providing market data.
**7. Implementation Aspects (Inferred):**
* **Responsible Agency/Bodies:** The European Banking Authority (EBA) drafted the regulatory technical standards on which this Regulation is based. Competent authorities are responsible for assessing compliance.
* **Timelines/Procedures:** The Regulation enters into force on the twentieth day following its publication in the Official Journal of the European Union. Specific implementation procedures will likely be determined by competent authorities within each Member State. The amendment suggests a need for institutions to review and update their internal policies and systems to align with the new requirements, particularly regarding risk factor modellability and assignment of non-trading book positions.
**8. Expected Outcomes / Impact of Changes:**
The likely intended outcomes of these specific changes are:
* Enhanced alignment with international banking standards (BCBS).
* Improved clarity and consistency in the classification of trading desks and the assessment of risk factor modellability.
* More transparent and robust risk management practices within credit institutions, particularly concerning foreign exchange and commodity risks in the non-trading book.
* Facilitated supervision by competent authorities through improved documentation and clarity.
**9. Conclusion:**
Commission Delegated Regulation (EU) 2025/878 represents a refinement of existing regulations governing prudential requirements for credit institutions. By clarifying technical details related to risk management and incorporating recent amendments to Union law, this amendment aims to enhance the stability and resilience of the financial system. The amendment's significance lies in its contribution to a more consistent and transparent regulatory framework for market risk management within the European Union.
Key Entities Referenced
Article 325bg(4): Article within Regulation EU No 575/2013
Article 325bf(9): Article within Regulation EU No 575/2013
European Union: Political and economic union of European countries.
Official Journal EN of the European Union L series 2025/878: Official publication of the European Union containing legal acts.
8.5.2025: Date of the Official Journal publication.
COMMISSION DELEGATED REGULATION (EU) 2025/878: Delegated regulation issued by the European Commission.
3 February 2025: Date of the Commission Delegated Regulation.
Delegated Regulation (EU) 2022/2059: Commission Delegated Regulation supplementing Regulation (EU) No 575/2013 with regard to regulatory technical standards specifying the technical details of backtesting and profit and loss attribution requirements.
Delegated Regulation (EU) 2022/2060: Commission Delegated Regulation supplementing Regulation (EU) No 575/2013 with regard to regulatory technical standards specifying the criteria for assessing the modellability of risk factors under the internal model approach IMA.
Delegated Regulation (EU) 2023/1577: Commission Delegated Regulation supplementing Regulation (EU) No 575/2013 with regard to regulatory technical standards on the calculation of the own funds requirements for market risk for nontrading book positions subject to foreign exchange risk or commodity risk and the treatment of those positions for the purposes of the regulatory backtesting requirements and the profit and loss attribution requirement under the alternative internal model approach.
EEA: European Economic Area
THE EUROPEAN COMMISSION: Executive branch of the European Union responsible for proposing legislation, implementing decisions, and managing the EU's day-to-day affairs.
Treaty on the Functioning of the European Union: One of the primary treaties of the European Union, outlining its scope and objectives.
Regulation (EU) No 575/2013: Regulation of the European Parliament and of the Council on prudential requirements for credit institutions and amending Regulation (EU) No 648/2012.
Regulation (EU) No 648/2012: European Market Infrastructure Regulation (EMIR).
European Parliament: Legislative branch of the European Union.
Council: Council of the European Union
Article 325(9): Article within Regulation EU No 575/2013
Article 325be(3): Article within Regulation EU No 575/2013
Regulation (EU) 2024/1623: Regulation of the European Parliament and of the Council amending some provisions of Regulation EU No 575/2013.
BCBS: Basel Committee on Banking Supervision
Union law: Law of the European Union
Article 325ba(3): Article within Regulation EU No 575/2013
Article 325be(1): Article within Regulation EU No 575/2013
Article 325bi: Article within Regulation EU No 575/2013
Article 104b(6): Article within Regulation EU No 575/2013
European Banking Authority: An agency of the European Union.
Article 37 of Regulation (EU) No 1093/2010: Article within Regulation EU No 1093/2010 establishing the Banking Stakeholder Group.
Regulation (EU) No 1093/2010: Regulation of the European Parliament and of the Council establishing a European Supervisory Authority (European Banking Authority).
Decision No 716/2009/EC: Decision of the European Parliament and of the Council
Commission Decision 2009/78/EC: Commission Decision.
Article 325bg: Article within Regulation EU No 575/2013
Article 6: Article within Delegated Regulation EU 2022/2059
Article 7: Article within Delegated Regulation EU 2022/2059
Article 8: Article within Delegated Regulation EU 2022/2059
Article 9: Article within Delegated Regulation EU 2022/2059
Article 325bg(1): Article within Regulation EU No 575/2013
Article 10: Article within Delegated Regulation EU 2022/2059
Article 325bg(2): Article within Regulation EU No 575/2013
Part Three, Title IV, Chapter 1a: Part, Title and Chapter within Regulation EU No 575/2013
Part Three, Title IV, Chapter 1b: Part, Title and Chapter within Regulation EU No 575/2013
Article 16: Article within Delegated Regulation EU 2022/2059
Article 2: Article within Delegated Regulation EU 2022/2060
Article 7(1): Article within Delegated Regulation EU 2022/2060
Article 1: Article within Delegated Regulation EU 2023/1577
Article 325b: Article within Regulation EU No 575/2013
Article 3: Article within Delegated Regulation EU 2023/1577
Article 4: Article within Delegated Regulation EU 2023/1577
Article 4: Article within Delegated Regulation EU 2023/1577
Brussels: City where the regulation was done.
Ursula VON DER LEYEN: President of the European Commission.
Official Journal EN
of the European Union L series
2025/878 8.5.2025
COMMISSION DELEGATED REGULATION(EU) 2025/878
of 3 February 2025
amending the regulatory technical standards laid down in Delegated Regulation (EU) 2022/2059,
Delegated Regulation (EU) 2022/2060 and Delegated Regulation (EU) 2023/1577 as regards the
technical details of back-testing and profit and loss attribution requirements, the criteria for
assessing the modellability of risk factors, and the treatment of foreign-exchange risk and commodity
risk in the non-trading book
(Text with EEA relevance)
THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union,
Having regard to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on
prudential requirements for credit institutions and amending Regulation (EU) No 648/2012(1), and in particular
Article 325(9), third subparagraph, Article 325be(3), third subparagraph, Article 325bf(9), third subparagraph, and
Article 325bg(4), third subparagraph, thereof,
Whereas:
(1) Regulation (EU) 2024/1623 of the European Parliament and of the Council(2) amended some provisions of
Regulation (EU) No 575/2013, to introduce a small number of remaining BCBS requirements that had not been
implemented in the previous banking package and some clarifications to the already existing requirements. Those
amendments should therefore be reflected in Commission Delegated Regulations (EU) 2022/2059(3),
(EU) 2022/2060(4)and (EU) 2023/1577(5), supplementing Regulation (EU) No 575/2013.
(2) To ensure a clearer alignment with the BCBS international standards and to additional amendments introduced in
Union law by Regulation (EU) 2024/1623, it is necessary to amend Delegated Regulation (EU) 2022/2059 to specify
that green zone desks, as classified in accordance with that Regulation, should be considered to have close theoretical
and hypothetical changes in the portfolio’s value, and yellow trading desks to have sufficiently close, but not close,
theoretical and hypothetical changes in the portfolio’s value. Red and orange zone desks should instead be
considered to have theoretical and hypothetical changes in the portfolio’s value that are neither close nor sufficiently
close.
(1) OJ L 176, 27.6.2013, p. 1.
(2) Regulation (EU) 2024/1623 of the European Parliament and of the Council of 31 May 2024 amending Regulation (EU) No 575/2013
as regards requirements for credit risk, credit valuation adjustment risk, operational risk, market risk and the output floor (OJ L,
2024/1623, 19.6.2024, ELI: http://data.europa.eu/eli/reg/2024/1623/oj).
(3) Commission Delegated Regulation (EU) 2022/2059 of 14 June 2022 supplementing Regulation (EU) No 575/2013 of the European
Parliament and of the Council with regard to regulatory technical standards specifying the technical details of back-testing and profit
and loss attribution requirements under Articles 325bf and 325bg of Regulation (EU) No 575/2013 (OJ L 276, 26.10.2022, p. 47,
ELI: http://data.europa.eu/eli/reg_del/2022/2059/oj).
(4) Commission Delegated Regulation (EU) 2022/2060 of 14 June 2022 supplementing Regulation (EU) No 575/2013 of the European
Parliament and of the Council with regard to regulatory technical standards specifying the criteria for assessing the modellability of
risk factors under the internal model approach (IMA) and specifying the frequency of that assessment under Article 325be(3) of that
Regulation (OJ L 276, 26.10.2022, p. 60, ELI: http://data.europa.eu/eli/reg_del/2022/2060/oj).
(5) 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 (OJ L 193, 1.8.2023, p. 1, ELI: http://data.europa.eu/eli/reg_del/2023/1577/oj).
ELI: http://data.europa.eu/eli/reg_del/2025/878/oj 1/5EN
OJ L, 8.5.2025
(3) It is necessary to amend Delegated Regulation (EU) 2022/2059 to remove the aggregation formula, currently laid
down in Article 16 of that Delegated Regulation, which is now laid down in Article 325ba(3) of Regulation (EU)
No 575/2013.
(4) To support competent authorities in their assessment on whether to allow institutions to use market data provided by
third-party vendors in the assessment of modellability of risk factors in accordance with Article 325be(1), second
subparagraph, of Regulation (EU) No 575/2013, it is necessary to adjust the documentation requirements laid down
in Delegated Regulation (EU) 2022/2060.
(5) To ensure additional clarity on the calculation of the own funds requirements for market risk in relation to non-
trading book positions, institutions should have clear policies outlining which are the trading desks in charge of
managing those positions, and they should be able to identify whether the foreign exchange positions just relate to
translation risk. It is therefore necessary to amend Delegated Regulation (EU) 2023/1577 to ensure that those
objectives are achieved.
(6) This Regulation is based on the draft regulatory technical standards submitted to the Commission by the European
Banking Authority.
(7) The European Banking Authority has conducted open public consultations on the draft regulatory technical
standards on which this Regulation is based, analysed the potential related costs and benefits and requested the
advice of the Banking Stakeholder Group established in accordance with Article 37 of Regulation (EU)
No 1093/2010 of the European Parliament and of the Council(6).
(8) The empowerments contained in Article 325(9), third subparagraph, Article 325be(3), third subparagraph,
Article 325bf(9), third subparagraph, and Article 325bg(4), third subparagraph of Regulation (EU) No 575/2013
aim to further specify technical elements to be used by the banks in their calculation of their own funds
requirements for market risk under the alternative internal model approach. As those empowerments are closely
linked by their subject matter, the amendments proposed in this Regulation provide a complete view of all of the
necessary changes to alternative internal models following the adoption of Regulation (EU) 2024/1623 and should,
thus, be bundled in this Regulation,
HAS ADOPTED THIS REGULATION:
Article 1
Delegated Regulation (EU) 2022/2059 is amended as follows:
(1) in Article 6, paragraph 1 is replaced by the following:
‘1. For the purposes of Article 325bg of Regulation (EU) No 575/2013, institutions shall calculate, for a given
trading desk’s portfolio, the Spearman correlation coefficient laid down in Article 7 of this Regulation, the
Kolmogorov-Smirnov test metric laid down in Article 8 of this Regulation and, based on the results of those
calculations, apply the criteria referred to in Article 9 of this Regulation.’;
(2) Article 9 is amended as follows:
(a) paragraph 1 is replaced by the following:
‘1. For the purposes of Article 325bg(1) of Regulation (EU) No 575/2013, institutions shall classify each of
the trading desks as a green, orange, yellow or red zone desk in accordance with paragraphs 2 to 5.’;
(b) the following paragraphs 6, 7 and 8 are added:
‘6. For the purposes of Article 325bg(1) of Regulation (EU) No 575/2013, a trading desk that has been
classified as a green zone desk shall be considered to have theoretical changes in the value of that trading
desk’s portfolio close to the hypothetical changes in the value of that trading desk’s portfolio.
(6) Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European
Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EC and repealing Commission
Decision 2009/78/EC (OJ L 331, 15.12.2010, p. 12, ELI: http://data.europa.eu/eli/reg/2010/1093/oj).
2/5 ELI: http://data.europa.eu/eli/reg_del/2025/878/ojEN
OJ L, 8.5.2025
7. For the purposes of Article 325bg(1) Regulation (EU) No 575/2013, a trading desk that has been
classified as a yellow zone desk shall be considered to have theoretical changes in the value of that trading
desk’s portfolio sufficiently close, but not close, to the hypothetical changes in the value of that trading desk’s
portfolio.
8. For the purposes of Article 325bg(1) Regulation (EU) No 575/2013, a trading desk that has been
classified as either an orange zone desk or a red zone desk shall be considered to have theoretical changes in
the value of that trading desk’s portfolio neither close nor sufficiently close to the hypothetical changes in the
value of that trading desk’s portfolio.’;
(3) Article 10 is replaced by the following:
‘Article 10
Calculation of the additional own funds requirement referred to in Article 325bg(2) of Regulation (EU)
No 575/2013
1. The additional own funds requirement referred to in Article 325bg(2) shall be equal to:
PLA ¼ k •max fASA – AIMA; 0g
addon aima
Where:
PLA = PLA as defined in Article 325ba(3) of Regulation (EU) No 575/2013;
addon addon
k= as specified in paragraph 2;
ASA = ASA as defined in Article 325ba(3) of Regulation (EU) No 575/2013;
aima aima
AIMA= AIMAas defined in Article 325ba(3) of Regulation (EU) No 575/2013.
2. For the purposes of paragraph 1, the coefficient k shall be calculated in accordance with the following formula:
∑ ASA
k ¼ 0;5 • i∈y i
∑ ASA
i ∈aima i
Where:
ASA = the own funds requirements for market risks as calculated in accordance with the alternative
i
standardised approach set out in Part Three, Title IV, Chapter 1a of Regulation (EU) No 575/2013 for
all the positions attributed to trading desk ‘i’;
i ∈ y= the indices of all trading desks that have been classified as yellow zone desks in accordance with
Article 9 of this Regulation among those for which the own funds requirements for market risks are
calculated in accordance with the alternative internal model approach set out in Part Three, Title IV,
Chapter 1b of Regulation (EU) No 575/2013;
i ∈ aima= the indices of all trading desks for which the own funds requirements for market risks are calculated in
accordance with the alternative internal model approach set out in Part Three, Title IV, Chapter 1b of
Regulation (EU) No 575/2013.’;
(4) Article 16 is deleted.
ELI: http://data.europa.eu/eli/reg_del/2025/878/oj 3/5EN
OJ L, 8.5.2025
Article 2
Delegated Regulation (EU) 2022/2060 is amended as follows:
(1) in Article 2, paragraph 4 is deleted;
(2) in Article 7(1), the following subparagraph is added:
‘Where an institution’s sources of verifiable price information referred to in point (b) of the first subparagraph include
third-party vendors, the institution shall document in addition for each third-party vendor the number of risk factors
that have been classified as modellable on the basis of the verifiable prices provided by that third party vendor, and a
materiality assessment of those risk factors.’.
Article 3
Delegated Regulation (EU) 2023/1577 is amended as follows:
(1) in Article 1, the following paragraph 6 is added:
‘6. When calculating the own funds requirements for market risk on a consolidated basis, in accordance with
Article 325b of Regulation (EU) No 575/2013, institutions shall be able to identify, in their internal risk-
management systems, the positions that have been included in the foreign exchange risk exposure of the institution
due to the translation risk resulting when translating the positions of each institution or undertaking of the group
into the same reporting currency in accordance with that Article.’;
(2) in Article 3, the following paragraphs 7 and 8 are added:
‘7. Institutions shall document, as part of the internal policies referred to in Article 325bi of Regulation (EU)
No 575/2013, whether non-trading book positions subject to foreign exchange risk are assigned to a trading desk
managing exclusively non-trading book positions in accordance with Article 104b(6) of Regulation (EU)
No 575/2013, or to a trading desk managing both trading and non-trading book positions. Where some non-
trading book positions subject to foreign exchange risk are assigned to a trading desk managing exclusively non-
trading book positions in accordance with Article 104b(6) of Regulation (EU) No 575/2013, and some others are
assigned to a trading desk managing both trading and non-trading book positions, the internal policies shall specify
the criteria and the rationale for the assignment to a trading desk exclusively managing non-trading book positions
or to a desk managing both trading and non-trading book positions.
8. When calculating the own funds requirements for market risk on a consolidated basis, in accordance with
Article 325b of Regulation (EU) No 575/2013, institutions shall be able to identify, in their internal risk-
measurement systems, the positions that have been included in the foreign exchange risk exposure of the institution
due to the translation risk resulting when translating the positions of each institution or undertaking of the group
into the same reporting currency in accordance with that Article.’;
(3) in Article 4, the following paragraph 4 is added:
‘4. Institutions shall document, as part of the internal policies referred to in Article 325bi of Regulation (EU)
No 575/2013, whether non-trading book positions subject to commodity risk or to both commodity and foreign
exchange risk are assigned to a trading desk managing exclusively non-trading book positions in accordance with
Article 104b(6) of Regulation (EU) No 575/2013, or to a trading desk managing both trading and non-trading book
positions. Where some non-trading book positions subject to foreign exchange risk are assigned to a trading desk
managing exclusively non-trading book positions in accordance with Article 104b(6) of Regulation (EU)
No 575/2013, and some others are assigned to a trading desk managing both trading and non-trading book
positions, the internal policies shall specify the criteria and the rationale for the assignment to a trading desk
exclusively managing non-trading book positions or to a desk managing both trading and non-trading book
positions.’.
4/5 ELI: http://data.europa.eu/eli/reg_del/2025/878/ojEN
OJ L, 8.5.2025
Article 4
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the
European Union.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 3 February 2025.
For the Commission
The President
Ursula VON DER LEYEN
ELI: http://data.europa.eu/eli/reg_del/2025/878/oj 5/5