EBA Clarifies Reporting of Negative Hedged Item Fair Value Changes in Resolution Template Z 02.00

Key Takeaways

• The EBA's final Q&A 2026_7795 confirms that negative fair value changes of hedged items in a portfolio hedge of interest rate risk must be reported in row 0400 "Residual liabilities" of template Z 02.00, with the outstanding amount reported as zero.
• Compliance and regulatory reporting teams should align their Annual Resolution reporting to this treatment and expect that related warning validation rules will not block submission.

Deep Dive

The EBA's final Q&A 2026_7795 confirms that negative fair value changes of hedged items in a portfolio hedge of interest rate risk must be reported in row 0400 "Residual liabilities" of template Z 02.00, with the outstanding amount reported as zero. Compliance and regulatory reporting teams should align their Annual Resolution reporting to this treatment and expect that related warning validation rules will not block submission.

First, where the "Fair value changes of the hedged items in portfolio hedge of interest rate risk" amount (FINREP F 01.02, row 0160) is negative and reported separately in Z 02.00, it must be reported in row 0400 "Residual liabilities" in the relevant carrying amount column. Second, the corresponding outstanding amount must be reported as zero. The EBA reasons that the outstanding amount reflects principal and accrued interest, meaning the claim a creditor would file in insolvency proceedings, and a hedge accounting fair value adjustment does not change that claim. Third, if a warning validation rule is triggered solely by this negative figure in row 0400, it should not prevent submission.

No new deadline is introduced. The Q&A was submitted on 26/03/2026 and published as final on 18/09/2026, so institutions should apply it in their next Annual Resolution reporting cycle. Institutions that have already submitted using a different treatment should assess whether resubmission or a note to the resolution authority is warranted. The EBA disclaimer also applies: the Q&A reflects the provisions in force on its publication date and is not systematically reviewed after legislative amendments.

Recommended actions:

(1) Review how Z 02.00 is populated for hedged liabilities under portfolio fair value hedges and confirm that negative row 0160 amounts flow to row 0400.

(2) Verify that the outstanding amount is set to zero for these items and that the reconciliation between carrying amount and outstanding amount is documented.

(3) Update data lineage, reporting instructions and control documentation, and brief the teams who own the FINREP-to-resolution reporting mapping.

(4) Document the rationale for any warning validation flags raised by this item, and be ready to explain them to the resolution authority or SRB if asked.

(5) Check prior-period submissions for consistency.

The risk impact is moderate and mainly concerns data quality and regulatory reporting accuracy. Inconsistent treatment could distort the liability structure that resolution authorities use for bail-in and loss-absorbency analysis, and could invite supervisory queries. Because the Q&A is non-binding guidance, institutions retain responsibility for correct application, but alignment with the EBA and SRB positions reduces the risk of challenge.

Source: European Banking Authority