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Version status: Repealed | Document consolidation status: Updated to reflect all known changes
Version date: 1 January 2014 - onwards
  Version 4 of 4    

Annex VII, Part C Internal Hedges

Repealed from 1 January 2014

1. An internal hedge is a position that materially or completely offsets the component risk element of a non‑trading book position or a set of positions. Positions arising from internal hedges are eligible for trading book capital treatment, provided that they are held with trading intent and that the general criteria on trading intent and prudent valuation specified in Parts A and B are met. In particular:

(a) internal hedges shall not be primarily intended to avoid or reduce capital requirements;

(b) internal hedges shall be properly documented and subject to particular internal approval and audit procedures;

(c) the internal transaction shall be dealt with at market conditions;

(d) the bulk of the market risk that is generated by the internal hedge shall be dynamically managed in the trading book within the authorised limits; and

(e) internal transactions shall be carefully monitored. Monitoring must be ensured by adequate procedures.

2. The treatment referred to in point 1 a

Comparing proposed amendment...