EBA Correlated Currencies 2026: What Changes for FX Risk Capital

ByOfficer

Last updated: April 2026

If your institution runs the standardised approach for foreign exchange risk, the list of closely correlated currencies directly determines how much capital you hold. A currency pair on the list gets a 4% capital charge on the matched position. A pair that drops off the list doubles that charge to 8%. On 28 April 2026, the EBA published the updated list for 2026, and it has been submitted to the European Commission for endorsement.

This is the kind of change that slips past teams who set up their FX risk engine once and treat it as done. I have seen institutions carry stale currency pair mappings for years because nobody flagged the annual update. The own funds impact is real, and it hits the next COREP submission after the revised ITS enters into force.

Related reading: COREP Reporting Explained

What the EBA Correlated Currencies List Is

Article 354 of Regulation (EU) No 575/2013 (the Capital Requirements Regulation, or CRR) sets out the closely correlated currencies framework. Article 354(1) provides the 4% capital charge for matched positions in closely correlated currencies, with a statistical correlation test based on three-year (99% probability) and five-year (95% probability) data windows. Article 354(3) mandates the EBA to develop implementing technical standards specifying which currency pairs qualify. The concept is straightforward: if two currencies move together tightly enough, a matched long/short position in that pair carries less FX risk than an unmatched position. The regulation rewards that lower risk with a reduced capital charge.

The statistical test behind the list is specific. A pair of currencies qualifies as closely correlated if the likelihood of a loss exceeding 4% on a matched position over a 10-working-day horizon is at least 99% (using three years of daily exchange-rate data) or 95% (using five years of data). The two thresholds work in tandem: the five-year window confirms long-run stability, while the three-year window applies a stricter test for recent co-movement. Operationally, the EBA scales the 4% ten-day loss limit by the square root of time to derive a daily threshold of approximately 1.265%, which translates to roughly a single-day breach criterion at the 99% confidence level over a three-year window. Currency pairs that breach this threshold too frequently fall off the list.

The result is a set of currency pair tables published as an annex to the ITS. Each table lists, for a given base currency, all the currencies deemed closely correlated to it. The list is not symmetric in its practical effects: a pair appears in both directions (EUR against DKK and DKK against EUR), but the institution’s reporting currency and net open position structure determine which pairings it actually uses in its capital calculation.

Why It Matters: The Capital Charge Difference

Under the CRR standardised approach for FX risk, the default own funds requirement is 8% of the net open position in each foreign currency. For matched positions in closely correlated currency pairs, Article 354 reduces that charge to 4%. The matched amount is the lower of the two opposite net positions in the pair.

Consider a Luxembourg bank with a EUR 50 million long position in DKK and a EUR 30 million short position in NOK. If DKK/NOK qualifies as a closely correlated pair, the EUR 30 million matched portion attracts a 4% charge (EUR 1.2 million in own funds). Without that designation, the same EUR 30 million portion sits in the general FX calculation at 8% (EUR 2.4 million). That is EUR 1.2 million in freed-up capital from a single currency pair.

One additional layer worth knowing about: Article 354(4) provides that matched positions in currencies of Member States participating in the second stage of the economic and monetary union (ERM II) may attract an even lower 1.6% charge instead of 4%. In current practice, this applies primarily to matched positions involving the Danish krone (DKK), which is in ERM II. For the DKK/EUR pair specifically, the matched portion can attract a 1.6% own funds charge. This is worth flagging because most institutions default to the 4% line under Article 354(1) without checking whether the 1.6% rate under Article 354(4) is available.

Scale that across multiple correlated pairs in a multi-currency book and the aggregate effect on total risk exposure amounts is material. Institutions with significant positions in Scandinavian currencies, CEE currencies, or Asian currencies pegged or closely linked to the USD should pay particular attention.

The 2026 Update: What Changed

The EBA published the 2026 update on 28 April 2026. The revised list and its annex have been submitted to the European Commission for endorsement. Once endorsed and published in the Official Journal, the updated ITS will replace the previous version.

The EBA conducts this update in line with the methodology and procedure set out in the applicable ITS. The data window rolls forward each year, meaning currency pairs that maintained tight correlation in prior years may fall off if recent volatility has increased, and pairs that were previously excluded may now qualify if exchange rate co-movement has tightened.

The EBA has not published a detailed change log comparing the 2026 list against the previous version. This means institutions need to do the comparison themselves. Download the 2026 annex from the EBA press release page and compare it pair-by-pair against the list currently programmed into your FX risk calculation engine.

What Reporting and Risk Teams Should Check Now

I work in a reporting environment where the correlated currencies list feeds directly into the COREP C 22.00 template (MKR SA FX). When the list changes, the mapping between row 020 (matched positions in closely correlated currencies) and the underlying positions needs to be updated. Here is what to verify.

1. Download and Compare

Get the 2026 annex PDF from the EBA press release page. Compare every currency pair currently flagged as correlated in your risk system against the new list. Flag any pairs that have been added or removed.

2. Update Your FX Risk Engine

Most institutions either hard-code the correlated pairs list in their market risk system or maintain a reference data table. Either way, the update is manual. Do not wait for the Official Journal publication to start the comparison. The content of the list is final once submitted to the Commission; endorsement is procedural.

3. Check the Timing

The revised ITS applies once endorsed by the Commission and published in the Official Journal. Monitor the Official Journal for the publication date. Your first COREP submission after that date should use the new list. If the list changes between reference dates, apply the version in force at the reporting reference date.

4. Validate C 22.00 Mappings

COREP template C 22.00 (MKR SA FX) captures the matched position amounts for closely correlated currencies in a specific row structure. If pairs are added, new matched positions may need to be reported. If pairs are removed, amounts previously in the matched-correlated row move to the general unmatched bucket at the 8% charge. Run a parallel calculation before the first affected submission to catch any mapping errors.

I have seen a case where a pair was removed from the list but the risk system continued to apply the 4% charge for two quarters because the reference data update was missed. The competent authority caught it during a thematic review. The capital shortfall was not large, but the remediation was embarrassing.

5. Review Multi-Currency Books

Institutions with significant non-EUR books should check whether any of their material FX positions involve pairs that moved on or off the list. This is especially relevant for banks with large exposures denominated in Scandinavian, CEE, or Asian currencies.

How the Methodology Works

The EBA’s methodology, set out in the original consultation paper (EBA/CP/2013/21) and carried forward in subsequent updates, assesses each currency pair formed by combining EU currencies with a set of non-EU currencies relevant to EU institutions.

EU currencies in scope include the euro, Bulgarian lev, Czech koruna, Danish krone, Hungarian forint, Polish zloty, Romanian leu, and Swedish krona. Non-EU currencies cover a broader scope: historically including USD, JPY, CHF, GBP (post-Brexit), CNY, NOK, AUD, CAD, NZD, HKD, SGD, plus emerging market currencies (TRY, MXN, ZAR, RUB) and Western Balkan currencies (ALL, BAM, MAD) where EU banks have material exposures. The full list is set in each annual ITS update.

For each pair, the EBA computes daily percentage changes in the exchange rate over a multi-year window. Each daily change is compared to the 1.265% threshold. If too many observations breach that threshold relative to the total sample, the pair fails the correlation test and is excluded from the list.

Pegged currencies are not treated differently. The EBA has stated that a peg is a policy choice that can be abandoned, and the statistical test captures the actual co-movement regardless of the peg mechanism. This matters for pairs like EUR/BGN and EUR/DKK, which are closely correlated due to exchange rate mechanisms but could theoretically decouple.

Interaction with CRR3 and FRTB

The closely correlated currencies framework under Article 354 applies to the current standardised approach for FX risk. Under CRR3 and the Fundamental Review of the Trading Book (FRTB), the treatment of FX risk changes significantly. The FRTB Standardised Approach (SA) uses a sensitivity-based framework with prescribed risk weights and correlations rather than a binary correlated/not-correlated designation.

For institutions still under the current standardised approach (which remains the relevant framework until FRTB reporting obligations take effect), the correlated currencies list continues to matter. Institutions that have already moved to FRTB parallel runs should still maintain the current list for their binding capital calculations. For more on the CRR3 transition, see our CRR3 Operational Risk Reporting in Luxembourg article.

Frequently Asked Questions

What is the legal basis for the EBA closely correlated currencies list?

Article 354 of Regulation (EU) No 575/2013 (CRR) sets out the closely correlated currencies framework. Article 354(1) provides the substantive 4% capital charge for matched positions and the statistical correlation test. Article 354(3) mandates the EBA to develop implementing technical standards specifying which currency pairs qualify under the standardised approach to FX risk capital requirements.

How often does the EBA update the list?

The EBA updates the list periodically, typically on an annual basis, using a rolling data window. The 2026 update was published on 28 April 2026.

When does the 2026 list take effect?

The revised ITS takes effect once endorsed by the European Commission and published in the Official Journal of the EU. The EBA submitted the 2026 update for endorsement on 28 April 2026. Monitor the Official Journal for the exact publication and application date.

What capital charge applies to closely correlated currency pairs?

Matched positions in closely correlated pairs attract a 4% own funds requirement under Article 354 CRR, compared to the standard 8% charge on unmatched FX positions under the standardised approach.

Which COREP template is affected?

Template C 22.00 (MKR SA FX) captures positions and own funds requirements for FX risk under the standardised approach. The matched positions in closely correlated currencies are reported in specific rows within this template.

Does the closely correlated currencies list affect institutions using internal models?

No. The list is specific to the standardised approach under Article 354 CRR. Institutions using approved internal models for market risk calculate FX risk capital using their model output, not the standardised matched-position methodology.

What happens if a currency pair is removed from the list?

The matched position in that pair no longer qualifies for the 4% reduced charge. The position moves to the general FX calculation at the 8% rate. Own funds requirements increase for that pair. The institution must update its risk system and COREP reporting accordingly.

Does the list change under FRTB?

The FRTB Standardised Approach replaces the binary correlated/not-correlated framework with sensitivity-based risk weights and prescribed correlation parameters. Once FRTB capital requirements become binding, the Article 354 list will no longer drive FX risk capital for institutions under the new framework.

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Key Takeaways

  • The EBA published the 2026 update of the closely correlated currencies list on 28 April 2026 under Article 354 CRR.
  • Closely correlated currency pairs qualify for a 4% own funds charge on matched positions, half the standard 8% rate.
  • The revised list has been submitted to the European Commission for endorsement. It takes effect upon Official Journal publication.
  • Institutions must compare the 2026 annex against their current FX risk system mappings to identify added or removed pairs.
  • COREP template C 22.00 (MKR SA FX) is the directly affected reporting template. Matched-position rows must reflect the current list.
  • Stale mappings are a common error. A pair removed from the list that continues to receive the 4% charge creates a capital shortfall.
  • The closely correlated currencies framework applies to the current standardised approach only. It does not affect internal model users and will be superseded by FRTB once binding.

Sources and References

Disclaimer: The information on RegReportingDesk.com is for educational and informational purposes only. It does not constitute legal, regulatory, tax, or compliance advice. Always consult your compliance officer, legal counsel, or the relevant supervisory authority for guidance specific to your institution.

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