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 on the question
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.
Answer
This question has been rejected because the matter it refers to has already been identified and will be considered for a forthcoming version of the Reporting framework / release of the respective validation rules.