45. This section sets out minimum requirements that the open structural position should fulfil to be recognised as being taken for hedging the ratio. It is important to stress that the fulfilment of such requirements does not entail that a position is actually suitable for being exempted. Indeed, whether the open structural position has been taken (or is maintained) for hedging the ratio will be assessed by the competent authority, considering also all other requirements included in these guidelines.
Long nature of the open FX position
46. If the purpose of structural FX positions is the hedging of the capital ratio, it is clear that only a net long FX position could potentially qualify for the exemption. Indeed, if an institution maintains a net short position, the effect on the numerator of the ratio of the fluctuations in the exchange rate will actually go in the reverse direction from the effect of the FX movement on the denominator of the ratio, exacerbating the effect of FX movem
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