Cash Flow Hedge Reserve
CA-2.4.6
The amount of the cash flow hedge reserve that relates to the hedging of items that are not fair valued on the balance sheet (including projected cash flows) must be derecognised in the calculation of CET1. This means that positive amounts must be deducted and negative amounts must be added back.
January 2015CA-2.4.7
This treatment specifically identifies the element of the cash flow hedge reserve that is to be derecognised for prudential purposes. It removes the element that gives rise to artificial volatility in common equity, as in this case the reserve only reflects one half of the picture (the fair value of the Shari'a compliant hedging contracts, but not the changes in fair value of the hedged future cash flow).
January 2015
