Article 16
Aggregation of the stress scenario risk measures
1. For the purposes of aggregating the stress scenario risk measures as referred to in Article 325bk(3), point (d), of Regulation (EU) No 575/2013, institutions shall, for each stress scenario risk measure they have computed, determine the corresponding rescaled stress scenario risk measure as follows:
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(a) |
where institutions determined the extreme scenario of future shock for a single risk factor in accordance with the stepwise method set out to in Article 3, the corresponding rescaled stress scenario risk measure shall be calculated in accordance with the following formula:
where:
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(b) |
where institutions determined a stress scenario risk measure for more than one risk factor by determining an extreme scenario of future shock in accordance with the stepwise method set out in Article 6 for a non-modellable standardised bucket comprising those risk factors, the corresponding rescaled stress scenario risk measure shall be calculated in accordance with the following formula:
where:
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(c) |
where institutions determined the extreme scenario of future shock for a single risk factor in accordance with the direct method set out in Article 2, the corresponding rescaled stress scenario risk measure shall be calculated with the following formula:
where:
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(d) |
where institutions determined a stress scenario risk measure for more than one risk factor by determining an extreme scenario of future shock in accordance with the direct method set out in Article 5 for the non-modellable bucket comprising those risk factors, the corresponding rescaled stress scenario risk measure shall be calculated in accordance with the following formula:
where:
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(e) |
where institutions determined a stress scenario risk measure by determining a regulatory extreme scenario of future shock in accordance with Article 14, the corresponding rescaled stress scenario risk measure shall be calculated in accordance with the following formula:
where:
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2. Institutions shall aggregate the stress scenario risk measures in accordance with the following formula:
where:
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ICSR denotes the set of non-modellable risk factors or non-modellable standardised buckets for which institutions determined a stress scenario risk measure that was classified as reflecting idiosyncratic credit spread risk only, in accordance with paragraph 3; |
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k is an index denoting the non-modellable risk factors or non-modellable standardised buckets belonging to ICSR ; |
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EIR denotes the set of non-modellable risk factors or non-modellable standardised buckets for which institutions determine a stress scenario risk measure that was classified as reflecting idiosyncratic equity risk only, in accordance with paragraph 4; |
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l is an index denoting the non-modellable risk factors or non-modellable standardised buckets belonging to EIR ; |
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OR denotes a non-modellable risk factor or non-modellable standardised bucket for which institutions determine a stress scenario risk measure that was neither classified as reflecting idiosyncratic credit spread risk only, in accordance with paragraph 3, nor idiosyncratic equity risk only, in accordance with paragraph 4; |
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j is an index denoting the non-modellable risk factors or non-modellable standardised buckets belonging to OR; |
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3. The non-modellable risk factors that institutions classify as reflecting idiosyncratic credit spread risk only shall meet all of the following conditions:
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(a) |
the nature of the risk factor is such that it reflects idiosyncratic credit spread risk only; |
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(b) |
the value taken by the risk factor is not driven by systematic risk components; |
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(c) |
the correlation among risk factors is negligible; |
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(d) |
institutions perform and document the statistical tests used to verify the condition set out in point (c). |
4. The non-modellable risk factors that institutions classify as reflecting idiosyncratic equity risk only shall meet all of the following conditions:
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(a) |
the nature of the risk factor is such that it reflects idiosyncratic equity risk only; |
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(b) |
the value taken by the risk factor is not driven by systematic risk components; |
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(c) |
the correlation among risk factors is negligible; |
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(d) |
institutions perform and document the statistical tests used to verify the condition set out in point (c). |