This Chapter describes the standardised method for calculation of the conventional bank licensee's foreign exchange risk, and the capital required against that risk. The measurement of the foreign exchange risk involves, as a first step, the calculation of the net open position in each individual currency including gold⁴⁸ and, as a second step, the measurement of the risks inherent in the conventional bank licensee's mix of long and short positions in different currencies.

⁴⁸ Positions in gold must be treated as if they were foreign currency positions, rather than as commodity positions, because the volatility of gold is more in line with that of foreign currencies and most banks manage it in similar manner to foreign currencies.