There are circumstances where the covered bond has been issued in one currency and the underlying assets are in a different currency. In which case, the covered bond programme would hedge this cross currency risk. In this circumstance, which FX rate should be applied? The spot FX rate as per the reporting date or the strike FX rate as per the swap agreement?
There is a choice between the swap FX rate or spot rate at reporting date.
The reporting shall be based on the legal framework which applies to the covered bond programme.
If the cross currency risk is hedged, the FX rate of the contract (here of the swap agreement) should be used.