Commission Delegated Regulation (EU) 2024/856 of 1 December 2023 supplementing Directive 2013/36/EU
as it stood on 2023-12-01, permalink: /eu-eurlex/32024r0856/2023-12-01
Article 1
- The six supervisory shock scenarios referred to in Article 98(5), second subparagraph, point (a), of Directive 2013/36/EU shall be the following:
| (a) | parallel shock up, where there is a parallel upward shift of the yield curve with the same positive interest rate shock for all maturities; |
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| (b) | parallel shock down, where there is a parallel downward shift of the yield curve with the same negative interest rate shock for all maturities; |
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| (c) | steepener shock, where there is a steepening shift of the yield curve, with negative interest rate shocks for shorter maturities and positive interest rate shocks for longer maturities; |
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| (d) | flattener shock, where there is a flattening shift of the yield curve, with positive interest rate shocks for shorter maturities and negative interest rate shocks for longer maturities; |
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| (e) | short rates shock up, with larger positive interest rate shocks for shorter maturities to converge with the baseline for longer maturities; |
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| (f) | short rates shock down, with larger negative interest rate shocks for shorter maturities to converge with the baseline for longer maturities. |
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- The two supervisory shock scenarios referred to in Article 98(5), second subparagraph, point (b), of Directive 2013/36/EU shall be the following:
| (a) | parallel shock up, where there is a parallel upwards shift of the yield curve with the same positive interest rate shocks for all maturities; |
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| (b) | parallel shock down, where there is a parallel downwards shift of the yield curve with the same negative interest rate shocks for all maturities. |
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- Institutions shall determine the supervisory shock scenarios referred to in paragraphs 1 and 2 on the basis of the currency-specific interest rate shocks set out in Part A of the Annex or, for the currencies not specified therein, on the basis of interest rate shocks calibrated in accordance with Part B of the Annex.
Institutions shall perform the calibration of interest rate shocks in accordance with Part B of the Annex at least every five years.
- Τhe supervisory shock scenarios referred to in paragraphs 1 and 2 shall apply to the exposure of institutions to the interest rate risk arising from non-trading book activities denominated in each currency separately for which the institution has relevant positions, i.e. where the accounting value of financial assets or liabilities denominated in that currency amounts to either of the following:
| (a) | 5 % or more of the total non-trading book financial assets or liabilities; |
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| (b) | less than 5 % of the total non-trading book financial assets or liabilities if the sum of financial assets or liabilities included in the calculation is lower than 90 % of total non-trading book financial assets, excluding tangible assets, or liabilities. |
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Article 2
Given, for each currency c, the specified size of the parallel, short and long shocks to the ‘risk-free’ interest rate, the following parameterisations of the six supervisory shock scenarios shall be applied:
| (1) | Parallel shock for currency c: A constant parallel shock up or down across all time buckets: |
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| (2) | Short rate shock for currency c:where tk is the midpoint (in time) of the kth time bucket. |
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| (3) | Long rate shock for currency c: |
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| (4) | Rotation shocks for currency c:; |
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Article 3
Institutions shall reflect in their calculations of the economic value of equity the common modelling and parametric assumptions set out in paragraphs 2 to 10:
Institutions shall include the following in their calculations of the economic value of equity:
| (a) | all non-trading book positions from interest rate sensitive instruments; |
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| (b) | small trading book business within the meaning of Article 94(1) of Regulation (EU) No 575/2013 of the European Parliament and of the Council (5) unless its interest rate risk is captured in another risk measure; |
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| (c) | automatic and behavioural options; |
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| (d) | pension obligations and pension plan assets unless their interest rate risk is captured in another risk measure; |
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| (e) | the cash flows from interest rate sensitive instruments, which shall include any repayment of principal, any repricing of principal and any related interest payments; |
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| (f) | instrument-specific interest rate caps and floors. |
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For the purpose of point (c), institutions shall adjust key behavioural modelling assumptions of interest rate sensitive instruments to the features of different interest rate scenarios taking into account the proportionality and materiality thresholds set out in Article 8(10), Article 9(2), Article 10(4), Article 12(2) and Article 23(1) of Commission Delegated Regulation (EU) 2024/857 (6).
All CET1 instruments and other perpetual own funds without any call dates shall be excluded from the calculations.
Institutions with a non-performing exposures ratio of 2 % or more shall include non-performing exposures as general interest rate sensitive instruments whose modelling should reflect expected cash flows and their timing. Non-performing exposures shall be included net of provisions. For these purposes, non-performing exposures shall be determined by debt securities, loans and advances classified as non-performing in accordance with Article 47a(3) of Regulation (EU) No 575/2013, while the non-performing exposures ratio shall be calculated as the amount of non-performing exposures divided by the amount of total gross debt securities, loans and advances calculated at the level of the institution.
Commercial margins and other spread components in interest payments in terms of their exclusion from or inclusion in the cash flows shall be treated in accordance with the institutions’ internal management and measurement approach for interest rate risk in the non-trading book. If commercial margins and other spread components are excluded, institutions shall:
| (a) | use a transparent methodology for identifying the risk-free rate at inception of each instrument; |
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| (b) | use a methodology that is applied consistently across business units; |
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| (c) | ensure that the exclusion of commercial margins and other spread components from the cash flows is consistent with how the institution manages and hedges interest rate risk arising from non-trading book activities; |
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| (d) | notify their exclusion to the competent authority. |
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The change in economic value of equity shall be computed with the assumption of a run-off balance sheet, where existing positions mature and are not replaced.
A maturity-dependent post-shock interest rate floor shall be applied for each currency starting with -150 basis points for immediate maturity. That floor shall increase by 3 basis points per year, eventually reaching 0 % for maturities of 50 years and more. If observed interest rates are lower than the post-shock interest rate floor, institutions shall apply the lower observed interest rate.
When calculating the aggregate change for each interest rate shock scenario, institutions shall add together any negative and positive changes occurring in each currency. Currencies other than the reporting currency shall be converted to the reporting currency at the European Central Bank spot FX rate on the reference date. Positive changes shall be weighted by a factor of 50 % or a factor of 80 % in the case of Exchange Rate Mechanism – ERM II currencies with a formally agreed fluctuation band narrower than the standard band of +/– 15 %. Weighted gains shall be recognised up to the greater of (a) the absolute value of negative changes in EUR or ERM II currencies and (b) the result of applying a factor of 50 % to the positive changes of ERM II currencies or EUR, respectively.
For discounting, an appropriate general ‘risk-free’ yield curve per currency shall be applied. That yield curve shall not include instrument-, sector- or entity-specific credit spreads or liquidity spreads.
In assessing the risk of interest rate-sensitive products that are linked to inflation or other market factors, prudent assumptions shall be applied. Those assumptions shall be based on the current/last observed value, on forecasts of a reputable economic research institute or on other generally accepted market practices and shall be generally scenario-independent.
Article 4
Institutions shall reflect in their calculations of the net interest income the common modelling and parametric assumptions set out in Article 3(2), (3) and (4) and (7) to (10). In addition, institutions shall reflect in their calculations of the net interest income the common modelling and parametric assumptions set out in paragraphs 2 to 4 of this Article.
Institutions shall consider in their calculations interest income and interest expenses over a one-year period regardless of the maturity and the accounting treatment of the relevant interest rate sensitive non-trading book instruments.
Institutions shall include in their calculations commercial margins and other spread components.
Institutions shall compute the change in the net interest income under the assumption of a constant balance sheet, where its total size and composition, including on- and off-balance sheet items, shall be maintained by replacing instruments with maturing or repricing cash flows with new instruments that have comparable features with regard to the currency, amount and repricing period of the instruments generating the repricing cash flows. Margins of the new instruments shall be based on the margins from recently bought or sold products with similar characteristics. In the case of instruments with observable market prices recent market spreads shall be used and not historical market spreads.
Article 5
A large decline for the purpose of Article 98(5), second subparagraph, point (b), of Directive 2013/36/EU shall be a decline of an institution’s one-year net interest income by more than 5 % of its Tier 1 capital, resulting from a sudden and unexpected change in interest rates as set out in any of the two supervisory shock scenarios set out in Article 1(2).
A large decline referred to in paragraph 1 shall be calculated based on the following formula:
Article 6
This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
Provenance and validity dates, identifier, hash
| as of | 2023-12-01 → this version applied |
| valid | 2023-12-01 → open publisher-asserted |
| type | REG_DEL Commission Delegated Regulation (EU) 2024/856 of 1 December 2023 supplementing Directive 2013/36/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the supervisory shock scenarios, the common modelling and parametric assumptions and what constitutes a large decline |
| language | en |
| published | 2023-12-01 |
| lex_id | eu-eurlex:32024r0856:2023-12-01 |
| record sha256 | 62dcb48eee3dd6149f3c92dd5bcf5e1bd233477ad71c43fdb4fb13b316da8a10 |
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