Article 331 Interest rate risk on derivative instruments

Institutions which mark to market and manage the interest-rate risk on the derivative instruments covered in Articles 328 to 330 on a discounted-cash-flow basis may, subject to permission by the competent authorities, use sensitivity models to calculate the positions referred to in those Articles and may use them for any bond which is amortised over its residual life rather than via one final repayment of principal. Permission shall be granted if these models generate positions which have the same sensitivity to interest-rate changes as the underlying cash flows. This sensitivity shall be assessed with reference to independent movements in sample rates across the yield curve, with at least one sensitivity point in each of the maturity bands set out in Table 2 in Article 339. The positions shall be included in the calculation of own funds requirements for general risk of debt instruments.

Institutions which do not use models under paragraph 1 may, treat as fully offsetting any positions in derivative instruments covered in Articles 328 to 330 which meet the following conditions at least:

the positions are of the same value and denominated in the same currency;

the reference rate (for floating-rate positions) or coupon (for fixed-rate positions) is closely matched;

the next interest-fixing date or, for fixed coupon positions, residual maturity corresponds with the following limits:

less than one month hence: same day;

between one month and one year hence: within seven days;

over one year hence: within 30 days.