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  1. Home
  2. Single Rulebook Q&A
  3. 2021_5683 Prudential filter on unrealised gains and losses corresponding to exposures to governments, local authorities and public sector entities and its interaction with hedging activities
Question ID
2021_5683
Legal act
Regulation (EU) No 575/2013 (CRR)
Topic
Own funds
Article
468
Paragraph
1
Subparagraph
-
COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
Not applicable
Article/Paragraph
Not applicable
Type of submitter
Credit institution
Subject matter
Prudential filter on unrealised gains and losses corresponding to exposures to governments, local authorities and public sector entities and its interaction with hedging activities
Question
Should institutions, remove from the calculation of their Common Equity Tier 1 items, the amount of unrealised gains and losses resulting from hedging the interest rate risk arising from exposures within the definition of paragraph 1of Article 468?
Background on the question
The Prudential filter provided for in Article 468 of Regulation 575/2013, allows institutions to remove from the calculation of their CET 1 items, the amount of unrealized gains and losses accumulated since 31 December 2019 accounted for as fair value changes on debt instruments, measured at FVOCI in the balance sheet, corresponding to exposures as defined in paragraph 1. Where institutions hedge the interest rate risk component of such exposures, should the amount of unrealized gains and losses arising from the hedge transaction be removed from the calculation of their CET 1 items? Example: An institution holds €100m of governmental debt falling within the definition of Article 468 (1). At 31 December 2020 the accumulated loss since 31 December 2019 due to adverse price movements amounted to €15m. The interest rate risk of the aforementioned exposures has been hedged and an unrealised gain of €4m has been recognised through OCI Will the amount A as defined in Article 468 (1) amount to €15m or does the institution need to consider the gain arising from the hedging transaction as well and thus set A equal to €11m?
Submission date
12/01/2021
Rejected publishing date
26/01/2023
Rationale for rejection

This question has been rejected because the matter it refers to is related to Article 468 of Regulation (EU) No 575/2013 as amended, which is no longer in force. For further information on the purpose of this tool and on how to submit questions, please see 'Additional background and guidance for asking questions'.

Status
Rejected question

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