- Question ID
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2014_944
- Legal act
- Regulation (EU) No 575/2013 (CRR)
- Topic
- Supervisory reporting - FINREP (incl. FB&NPE)
- Article
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99
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- Regulation (EU) No 680/2014 - ITS on supervisory reporting of institutions (repealed)
- Article/Paragraph
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ITS part 2.68
- Type of submitter
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Consultancy firm
- Subject matter
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Table 11.1 - notional amount of derivatives used in two hedge relationshops (fair value and cash flow hedges)
- Question
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Reporting of notional amount of derivative in more than one hedge relationship: If a derivative (e.g. cross currency swap) is used in two hedging relationships (fair value hedge and cash flow hedge), how should the notional amount of the cross currency swap be reported in Table 11.1? Should the notional of the derivative be reported: a) only once- allocated to one hedge relationship b) reported two times (double reporting)- in both hedge relationship types c) allocated and reported in both hedge relatioship types
- Background on the question
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Sometimes a derivative is used in two hedging relationships (fair value hedge and cash flow hedge), how should the notional amount of the cross currency swap be reported in Table 11.1
- Submission date
- Final publishing date
-
- Final answer
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Paragraph 68 Part 2 (10.1) of Annex V of Regulation (EU) No 680/2014 13 ITS on Supervisory Reporting of institutions (ITS) states that "When a derivative is influenced by more than one type of underlying risk, the instrument shall be allocated to the most sensitive type of risk. " The purpose of this paragraph is to avoid double reporting of the same derivative position held by the reporting institution. Despite IAS 39 IG F.1.12 a, b (guidance requiring reporting of hedging instruments separately for each hedge) FINREP reporting avoids double reporting of derivatives. Therefore analogously, when the same derivative is aimed at two hedging relationships, its notional amount shall be allocated to that one to which it is providing a more efficient hedge according to IAS 39 or the applicable accounting standards. For the purposes of F 11.01 Template and considering the example given in the question, this approach would mean that the cross-currency swap should either be reported as cash flow hedge or as fair value hedge. The reporting institution shall assess which hedge prevails, considering the characteristics of the derivative and effectiveness of the hedging transaction.
- Status
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Final Q&A
- Answer prepared by
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Answer prepared by the EBA.
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