v6566_s, v6567_s, v6327_m: FV changes of hedged items in portfolio hedge of IRR

Should the warnings from EBA validation rule v6566_s be maintained for data point {C 32.01, r0120, c0010}? And what about EBA validation rule v6327_m for C 32.01, r0120? Consistently, should EBA validation rule v6567_s be amended to exclude rows 0010, 0020 and 0120 from the check?

‘Fair value changes of the hedged items in portfolio hedge of interest rate risk’ have to be reported in template C 32.01, row 0120. The instructions of Annex II for this row refer to IAS 39.89A(a) and also indicate that the information reported in this row shall correspond to row 0250 of template F 01.01 (FINREP). That FINREP template refers to the same IAS 39.89A(a). The distinction that is used both in C 32.01 (rows 0120 and 0200) and in F 01.01 (row 0250) / F 01.02 (row 0160), via the references to IAS 39.89A(a) for the assets rows and IAS 39.89A(b) for the liabilities row, is that the deciding factor is whether the hedged item is an asset or a liability. As in our case the hedged item is an asset, we should be reporting in C 32.01, r0120 and F 01.01, r0250. Whereas the validation rules for FINREP appropriately reflect that this 'assets' row can have a negative value, the v6566_s validation rule still triggers a warning. Additionally we observe that EBA validation rule v6327_m checks that the value in C 32.01, c0020 should be a smaller value than reported in C, 32.01, c0010. Only rows 0140 and 0200 are excluded from the check. In our opinion, row 0120 should also be excluded from the check. Column 0020 in C 32.01 is an “of which: trading book” presentation of the values reported in column 0010. Based on the above, the value reported in {C 32.01, r0120, c0010} can correctly be a negative value, because it is also not unexpected that this amount is not included in the trading book, that value is not unlikely to be 0. This would trigger the warning for this validation rule (0 > a negative value), which in our opinion is not appropriate. The above also triggers EBA validation rule v6567_s, which checks that the value reported in column 0030 cannot be negative. However specifically for C 32.00, r0120 we would expect that the amount reported in c0010 will generally be excluded via row 0030, given that by design it is expected to be ‘exactly matching’. By reporting the negative amount that we report in C 32.01, r0120, c0010 also in C 32.01, r0120, c0030, we end up with situation that effectively 0 is included towards the EUR 15 billion threshold of Article 4(1) of Delegated Regulation 2016/101. We understand that, given that Article 4(1) of Delegated Regulation 2016/101 refers to the absolute value of fair-valued assets and liabilities, no subtraction should apply in column 0080. Given that C 32.01, r0120, c0010 can be a negative amount based on EBA’s instructions, we believe also v6567_s should be amended to prevent a “netting” effect in C 32.01, c0080.