179. Institutions should take into account that foreign exchange lending risk: a) may arise from …

Institutions should take into account that foreign exchange lending risk:

• a) may arise from the unhedged borrower’s (i.e. retail and as small and medium-sized enterprise-SME borrowers without a natural or financial hedge that are exposed to a currency mismatch between the loan currency and the hedge currency, as defined in EBA/GL/2014/13) inability to service debt denominated in currencies other than the currency of the Member State in which the institution has been authorised;
• b) is related to pure credit and foreign exchange market risk;
• c) is characterised by a non-linear relationship of credit and foreign exchange market risk components;
• d) is influenced by the general exchange rate risk; and
• e) may arise from conduct-related risk.

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

• EBA - Published by the European Banking Authority at https://www.eba.europa.eu/