Article 19
Calculation of the contribution of the projected risk-free interest rate on the reinvestment or refinancing of notional repricing cash flows
1.
To calculate the contribution of the projected risk-free yield on the reinvestment or refinancing of notional repricing cash flows to the net interest income as referred to in paragraph 4, institutions shall, for each currency and each scenario, calculate forward rates that reflect the risk-free component of interest rates that is expected to be applied to risk-free loans starting at the repricing midpoints of the repricing time buckets referred to in point 4 of the Annex and with maturities that correspond to the reference term time bucket midpoints referred to in point 3 of the Annex.
2.
Institutions shall calculate the forward rates referred to in paragraph 1 in accordance with the following formula:
where:
t k is the midpoint of repricing time bucket k;
REF j is the midpoint of reference term time bucket j;
is the forward rate for the respective scenario i and for currency c for a risk-free loan starting at the midpoint of repricing time bucket k and maturing at the midpoint of reference term time bucket j;
is the discounting factor for the respective scenario i and for currency c and time t
k
as referred to Article 17(3).
3.
Institutions shall calculate the applicable risk-free interest rate, for each combination of a repricing time bucket midpoint with a reference term time bucket midpoint, by multiplying the forward rates referred to in paragraph 1 with the remaining time horizon referred to in Article 18, second subparagraph.
4.
Institutions shall calculate the contribution of the projected risk-free interest rate on the reinvestment or refinancing of notional repricing cash flows to the net interest income as the product of the following points (a) and (b):
(a)
the notional repricing cash flows referred to in Articles 6, 7 and 8, Article 9(5), Article 10(7), Article 11(2), second subparagraph, and Article 12, allocated in accordance with Article 14(4) and (5);
(b)
the contribution of the corresponding applicable risk-free interest rate calculated in accordance with paragraph 3 of this Article.