Article 10
Fixed rate term deposits that are subject to the risk of early redemption
1.
Institutions shall consider fixed rate term deposits as fixed rate term deposits subject to the risk of early redemption where both of the following applies:
(a)
those fixed rate term deposits constitute retail deposits;
(b)
the depositor holds the option to redeem any outstanding amount of the fixed rate term deposits before the contractual maturity date of the deposit.
2.
By way of derogation from paragraph 1, institutions may treat fixed rate term deposits in accordance with Article 6 where the early withdrawal of those deposits would result in a penalty for the depositor compensating both for the loss of interest between the date of the deposit’s redemption and the date of its contractual maturity and for the economic cost of redeeming the deposit.
3.
Institutions shall treat fixed rate term deposits that are wholesale deposits in accordance with Article 6.
Where the wholesale depositor holds the option to redeem any outstanding amount of the deposit before its contractual maturity date and the conditions set out in paragraph 2 are not met, institutions shall treat that option as an embedded automatic option in accordance with Article 13.
4.
Institutions shall estimate the baseline cumulative term deposit redemption rate for the fixed rate term deposits referred to in paragraph 1 in a way that is consistent over time and which is suitable for an average early redemption rate. Institutions shall estimate that baseline cumulative term deposit redemption rate separately for each portfolio of homogeneous products denominated in a currency and under the prevailing term structure of interest rates, based on all available internal observations.
For the purposes of the first subparagraph, institutions may set the baseline cumulative term deposit redemption rate at 0 where the total of the fixed rate term deposits referred to in paragraph 1 is smaller than 5 % of the non-trading book positions that are accounted for as liabilities in accordance with the applicable accounting framework.
5.
Institutions shall adjust the baseline cumulative term deposit redemption rate for the fixed rate term deposits estimated in accordance with paragraph 4 to the applicable scenarios as follows:
(a)
in scenarios that prescribe a decrease of the short-term interest rates as referred to in Article 4, points (a)(ii), (b)(ii), and (c)(ii), institutions shall multiply the redemption rate by 0,8;
(b)
in scenarios that prescribe an increase of the short-term interest rates as referred to in Article 4, points (a)(i), (b)(i), and (c)(i), institutions shall multiply the redemption rate by 1,2.
6.
For each repricing time bucket as referred to in point 1 of the Annex, institutions shall obtain the expected amount of early redeemed fixed rate term deposits by multiplying the fixed rate term deposits referred to in paragraph 1 of a certain homogeneous product type denominated in a certain currency by the applicable baseline cumulative term deposit redemption rate for the fixed rate term deposits adjusted in accordance with paragraph 5.
7.
Institutions shall, for all repricing time buckets and sets of homogeneous product types, obtain the total amount of the early redeemed fixed rate term deposits by aggregating the early redemption amounts referred to in paragraph 6. Institutions shall allocate the aggregated early redeemed amounts in the repricing time bucket referred to in point 1(a) of the Annex. Institutions shall allocate the parts of the notional repricing cash flows of the fixed rate term deposits referred to in paragraph 1 that they do not expect to be redeemed early to the relevant repricing time buckets referred to in point 1 of the Annex according to their contractual maturity.