Article 17
Calculation of the economic value of equity and changes in the economic value of equity
1.
Institutions shall calculate the economic value of equity for the baseline scenario and the applicable shock scenarios in each currency in accordance with paragraphs 2, 3 and 4. Institutions shall calculate the changes in the economic value of equity in accordance with paragraphs 5 and 6.
2.
Institutions shall allocate the notional repricing cash flows referred to in Articles 6, 7 and 8, Article 9(5), Article 10(7), Article 11(2), and Article 12, to the repricing time buckets referred to in those Articles in the following manner:
(a)
all positive and negative notional repricing cash flows within a repricing time bucket shall be netted, forming a net long or net short position for each repricing time bucket;
(b)
incoming cash flows shall have a positive sign and outgoing cash flows shall have a negative sign.
3.
Institutions shall discount net notional repricing cash flows towards a present value by using a discount factor. Institutions shall calculate that discount factor
from the spot zero interest rate
at the bucket midpoint for the respective scenario i and currency c multiplied by the bucket midpoint t
k
as follows:
4.
Institutions shall sum up the discounted net repricing cash flows across all repricing time buckets to determine the economic value of equity for the baseline scenario and the applicable scenarios, for each currency.
5.
Institutions shall calculate the change in the economic value of equity by subtracting the economic value of equity in the baseline scenario from the economic value of equity in the applicable scenario, and by adding the change of the value of the automatic interest rate option calculated in accordance with Article 13.
6.
When calculating the aggregate change for each scenario, institutions shall add together any negative and positive changes occurring in each currency. In that calculation, institutions shall convert currencies, other than the reporting currency, to the reporting currency at the ECB spot FX rate on the reference date. Positive changes shall be weighted by a factor of 50 % or by a factor of 80 % in the case of Exchange Rate Mechanism (‘ERMII’) currencies with a formally agreed fluctuation band narrower than the standard band of +/-15 %.
Institutions shall recognise weighted gains up to the greater of either of the following values:
(a)
the absolute value of negative changes in EUR or ERM II currencies;
(b)
the result of applying a factor of 50 % to the positive changes of ERM II currencies or EUR.