4.1.3 Cash Flow Hedge Reserves
| No: 341000015689 | Date(g): 19/12/2012 | Date(h): 6/2/1434 |
Effective from Dec 19 2012 - Dec 18 2012
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The amount of the cash flow hedge reserves that relates to the hedging of items that are not fair valued on the balance sheet (including projected cash flows) should be derecognized in the calculation of Common Equity Tier 1. This means that positive amounts should be deducted and negative amounts should be added back.
This treatment specifically identifies the element of the cash flow hedge reserve that is to be derecognized 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 derivative, but not the changes in fair value of the hedged future cash flow).