Question ID: 1850
Regulation Reference: (EU) No 2015/2450 - templates for the submission of information to the supervisory authorities
Article: 35
Status: Final
Date of submission: 13 Sep 2019
Question
In case of below two Foreign Exchange contract examples:
Example 1
> EUR2CHF (reporting currency is EUR)
> Notional short leg (base): 950,000.00 EUR
> Notional long leg (local): 1,078,427.18 CHF
> Base value at reporting date: 957,021.55
Example 2
> CAD2USD (reporting (base) currency is EUR)
> Notional short leg (local): 300,000.00 CAD
> Notional long leg (local): 227,261.71 USD
> Notional amount (base): 198,676.53 EUR
> Base value short leg at reporting date: 191,546.39 EUR
> Base value long leg at reporting date: 197,925.66
Background of the question
Would below Solvency II columns be reflecting the data accordingly:
Example 1
> C0130 - Notional amount of the derivative (Base): 950,000.00
> C0240 - Solvency II Value (Base): 7,021.55
> C0370 - Currency: CHF
> C0390 - Trigger value: EUR 1.1351865
> C0160 – Profit and Loss to date (base): 7,021.55
> C0410 - <Empty>
> C0420 - <Empty>
Example 2
> C0130 - Notional amount of the derivative (Base): 198,676.53
> C0240 - Solvency II Value (Base): 6,379.27
> C0370 - Currency: USD
> C0390 - Trigger value: CAD 1.320064
> C0160 – Profit and Loss to date (base): 6,379.27
> C0410 - CAD
> C0420 - USD
EIOPA answer
C0130 "Notional amount of the derivative" has to be converted to the reporting currency of the undertaking with the exchange rate at the reporting reference date.
In a currency forward contract the notional amount is typically specified in the long currency, so if one is long CHF and short EUR the amount in the contract in CHF and it needs to be in the reporting currency (EUR) by the undertaking when reporting. With this respect the two examples are correctly reporting C0130.
C0370 "currency" should be the currency isocode of the "long currency" in the contract. (i.e. as correctly reported: CHF in example 1 and USD in example 2);
C0390 "trigger value" should be reported with the following convention: price of the currency purchased (long) in terms of the currency sold (short).
(i.e. as correctly reported in the two examples: EUR 1.1351865 in example 1 and CAD 1.320064 in example 2.)
C0140 and C0160 have to be in reporting currency and are correctly reported in the two examples.
C0410 and C0420 (in S.08.01) and C0350 and C0360 (in S.08.02) should not be filled for Forwards contracts.
Check also Q&A 687, 957, 973.