EBA · 2025_7516 Rejected question

Clarification Request Regarding Validation Rule 6514_m for LDR Template T.04 and Its Comparison of Own Funds with Outstanding Principal Plus Accrued Interest

Regulation
Directive 2014/59/EU (BRRD)
Article
45
Topic
Interactions with the CRR / CRD IV and the BRRD
Submitted by
Credit institution
Submitted
2025-07-08
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Question

For example, for financial instrument measured at fair value, the inclusion of hedge adjustments (which may either increase or decrease the measured value) may cause the amount recognized as own funds to be higher than the simple sum of outstanding principal and accrued interest. This could lead to a breach of Validation Rule 6514_m. Given these developments, discrepancies may now arise due to the inherent variability introduced by the updated valuation adjustments.

Background

Following the publication of the “EBA Report on the Monitoring of AT1, Tier 2 and TLAC/MREL Eligible Liabilities Instruments of EU Institutions (EBA/REP/2024/11)” , that confirms the alignment of prudential treatment to accounting valuations—whereby hedge adjustments, accrued interest and related valuation effects are now fully incorporated into the own funds figures, the Bank has noted that Validation Rule 6514_m—as implemented within LDR Template T.04—verifies that  the reported own funds amount cannot be higher than the sum of outstanding principal plus accrued interest.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2025_7516

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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