1.   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:

2.   Institutions shall include the following in their calculations of the economic value of equity:

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).

3.   All CET1 instruments and other perpetual own funds without any call dates shall be excluded from the calculations.

4.   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.

5.   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:

6.   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.

7.   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.

8.   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.

9.   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.

10.   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.