Article 20
Calculation of the contribution of the projected commercial margin on the reinvestment or refinancing of notional repricing cash flows
1.
Institutions shall calculate the contribution of the projected commercial margin on the reinvestment or refinancing of notional repricing cash flows to the net interest income by multiplying the notional repricing cash flows calculated in accordance with paragraph 2 by the applicable commercial margin yield referred to in paragraph 4.
2.
For the purposes of the calculation referred to in paragraph 1, institutions shall:
(a)
allocate, at the reset of commercial margins, the notional repricing cash flows of the instruments referred to in Articles 6 to 12 to the repricing time buckets referred to in point 4 of the Annex;
(b)
estimate:
(i)
the applicable commercial margin rate, in accordance with paragraph 3 of this Article;
(ii)
the remaining time referred to in Article 18, second subparagraph.
For the purposes of point (a), Articles 6 to 12 shall apply mutatis mutandis. However, in the case of floating rate instruments, institutions shall allocate the part of notional repricing cash flows that constitutes a principal amount in accordance with the final contractual maturity date of those floating rate instruments.
3.
For the purposes of paragraph 1, institutions shall allocate the non-trading book positions to the product types of financial assets and financial liabilities, divided by geographical location and currency denomination.
The product types of financial assets referred to in the first subparagraph shall be the following:
(a)
debt securities;
(b)
loans and advances – non-financial corporates;
(c)
loans and advances – households – mortgages;
(d)
loans and advances – households – credit (non-mortgage);
(e)
loans and advances – other counterparties;
(f)
other products in the non-trading book.
The product types of financial liabilities referred to in the first subparagraph shall be the following:
(a)
deposits – non-financial corporates;
(b)
deposits – households;
(c)
deposits – other counterparties;
(d)
debt securities;
(e)
other liabilities in the non-trading book.
4.
In the case of instruments traded in deep and active liquid markets where the value of those instruments can be determined on the basis of widely disseminated and easily available market prices, institutions shall estimate the applicable commercial margin rate referred to in paragraph 2, point (b), on the basis of the market price, the interest payments of those instruments and the deduction of the risk-free interest rate.
In the case of other instruments than those referred to in the first subparagraph, institutions shall estimate the applicable commercial margin rate referred to in paragraph 2, point (b), on the basis of the weighted average of commercial margins received or paid in transactions during the preceding 360 days, having regard to the product type, the geographical location, and the currency denomination, referred to in paragraph 2. In the absence of such transactions, institutions shall estimate the applicable commercial margin rate on the basis of assumptions relying on margins received or paid in comparable portfolios.
5.
The applicable commercial margin rate in the baseline scenario, estimated in accordance with paragraph 3, shall also apply in the applicable scenario.
6.
To take into account the remaining time referred to in Article 18, second subparagraph, institutions shall calculate the percentage of commercial margin yield by multiplying the applicable commercial margin rate estimated in accordance with paragraph 3 of this Article by that remaining time.