The rule in plain words
Economic hedges with use of the fair value option cannot be more than credit.
EBA checks it for seven columns: financial assets held for trading and trading, financial assets measured at a cost-based method / LOCOM, financial liabilities measured at a cost-based method / LOCOM, financial liabilities held for trading and trading, positive value, negative value, and total trading. That makes seven checks. A failure names the one that failed.
How the Line4 Check report words itShowHide
The first of its checks, word for word as the report shows it when it fails. The others read the same, with their own column, row or sheet.
Negative value: of which: economic hedges with use of the fair value option <= Credit
What to do if your filing fails it
- 01Open the template below and find the cells the rule reads.
- 02Compare the values in your file. If the first is bigger than it may be, one of them is wrong: check both before you change either.
- 03EBA allows a small rounding difference, worked out from the decimals each value is reported with.
- 04It runs only when your filing indicators mark F 10.00 as reported.
- 05This is a warning. It does not stop the filing on its own, but your authority may ask you to explain it.
The cells it reads
Derivatives: trading and economic hedges (F 10.00)
Rows
- 0190Credit
- 0195of which: economic hedges with use of the fair value option
Columns
- 0010Financial assets Held for trading and trading
- 0011of which: Financial assets measured at a cost-based method / LOCOM
- 0016of which: Financial liabilities measured at a cost-based method / LOCOM
- 0020Financial liabilities Held for trading and trading
- 0022Positive value
- 0025Negative value
- 0030Total Trading
A worked example
The first of its checks, with simple numbers.
Credit must then be at least 1,200.
A file that reports 1,200 passes. One that reports 1,100 fails, by 100.
The numbers are illustrative, reported to the unit, so the rounding tolerance does not change the result.
Show the rule as writtenShowHide
EBA's formula, as written out for the first of its checks. Cells are written as {template, row, column, sheet}.
{F_10.00,r0195,c0025,} <= {F_10.00,r0190,c0025,}The next five:
{F_10.00,r0195,c0016,} <= {F_10.00,r0190,c0016,}{F_10.00,r0195,c0030,} <= {F_10.00,r0190,c0030,}{F_10.00,r0195,c0010,} <= {F_10.00,r0190,c0010,}{F_10.00,r0195,c0020,} <= {F_10.00,r0190,c0020,}{F_10.00,r0195,c0022,} <= {F_10.00,r0190,c0022,}And 1 more, the same formula for the other cells it covers.
Other rules on F 10.00
- Economic hedges cannot be more than foreign exchange and gold (v0848_m)Warning
- Economic hedges cannot be more than commodity (v0850_m)Warning
- Foreign exchange and gold must equal the sum of its four parts (v0847_m)Warning
- Economic hedges cannot be more than other (v0851_m)Warning
- Economic hedges cannot be more than equity (v0846_m)Warning
- Equity must equal the sum of its four parts (v0845_m)Warning
- Economic hedges cannot be more than interest rate (v0844_m)Warning
- Derivatives cannot be less than the sum of three rows (v0854_m)Warning
Every FINREP 9 rule, by template
Checks like this one, run at the point of submission, are the first step to real-time supervision.