The rule in plain words
None of the values it checks in derivatives: hedge accounting can be negative.
EBA checks it for eight columns: assets, assets carried at amortised cost / LOCOM, liabilities, liabilities carried at amortised cost / LOCOM, total hedging, derivatives carried at amortised cost / LOCOM, positive value and negative value. And for 32 rows, from interest rate (0010) to OTC - rest (0260). That makes 256 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.
Liabilities: Total return swap >= 0
What to do if your filing fails it
- 01Open the template below and find the cells the rule reads.
- 02Look for a value with the wrong sign in these cells, such as an amount entered as a negative number.
- 03EBA compares the values exactly here: there is no rounding tolerance.
- 04It runs only when your filing indicators mark F 11.02 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 - hedge accounting under national GAAP: Breakdown by type of risk (F 11.02)
Rows
- 0010Interest rate
- 0020OTC options
- 0030OTC other
- 0040Organized market options
- 0050Organized market other
- 0060Equity
- 0070OTC options
- 0080OTC other
- 0090Organized market options
- 0100Organized market other
- 0110Foreign exchange
- 0120OTC options
- 0130OTC other
- 0140Organized market options
- 0150Organized market other
- 0160Credit
- 0170Credit default swap
- 0180Credit spread option
- 0190Total return swap
- 0200Other
- 0210Commodity
- 0220Other
- 0230Derivatives - Hedge Accounting
- 0231of which: fair value hedges
- 0232of which: cash flow hedges
- 0233of which: cost-price hedges
- 0234of which: hedge in net investments in a foreign operation
- 0235of which: portfolio fair value hedges of interest rate risk
- 0236of which: portfolio cash flow hedges of interest rate risk
- 0240OTC - credit institutions
- 0250OTC - other financial corporations
- 0260OTC - rest
Columns
- 0005Assets
- 0006of which: assets carried at amortised cost / LOCOM
- 0007Liabilities
- 0008of which: liabilities carried at amortised cost / LOCOM
- 0010Total hedging
- 0011of which: derivatives carried at amortised cost / LOCOM
- 0030Positive value
- 0040Negative value
A worked example
The first of its checks, with simple numbers.
Total return swap, liabilities must then be at least 0.
A file that reports 0 passes. One that reports -100 fails, by 100.
The numbers are illustrative.
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_11.02,r0190,c0007,} >= 0The next five:
{F_11.02,r0090,c0040,} >= 0{F_11.02,r0100,c0008,} >= 0{F_11.02,r0230,c0040,} >= 0{F_11.02,r0220,c0030,} >= 0{F_11.02,r0234,c0005,} >= 0And 250 more, the same formula for the other cells it covers.
Other rules on F 11.02
- None of the 46 values it checks in derivatives: hedge accounting can be negative (v3934_s)Warning
- Derivatives, hedge accounting cannot be less than fair value hedges (v5138_m)Blocking
- Derivatives, hedge accounting cannot be less than cash flow hedges (v5139_m)Blocking
- Derivatives, hedge accounting cannot be less than cost-price hedges (v5140_m)Blocking
- Derivatives, hedge accounting cannot be less than hedge in net investments in a foreign operation (v5141_m)Blocking
- Derivatives, hedge accounting cannot be less than portfolio fair value hedges of interest rate risk (v5142_m)Warning
- Derivatives, hedge accounting cannot be less than portfolio cash flow hedges of interest rate risk (v5143_m)Warning
- Credit cannot be less than credit default swap (v1958_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.