- Question ID
-
2017_3121
- Legal act
- Directive 2013/36/EU (CRD)
- Topic
- Supervisory review and evaluation (SREP) and Pillar 2
- Article
-
98
- Paragraph
-
5
- COM Delegated or Implementing Acts/RTS/ITS/GLs/Recommendations
- EBA/GL/2015/08 - Guidelines on the management of interest rate risk arising from non-trading activities
- Article/Paragraph
-
23
- Name of institution / submitter
-
Deutsche Bundesbank
- Country of incorporation / residence
-
Germany
- Type of submitter
-
Competent authority
- Subject matter
-
Application of the 0% floor in the calculation of the supervisory standard shock (particularly downward scenario).
- Question
-
In times of already negative interest rates, how should banks apply the 0% floor?
- Background on the question
-
The calculation focuses on the comparison of base scenario and -200bps scenario – if then the base scenario already incorporates negative interest rates, banks could interpret that the negative interest rate curve has to be shifted to zero. This might result in a (partially) positive shock in the downward scenario.
Questions were raised during On-Site Inspections and within the scope of the ongoing su-pervisory process
- Submission date
- Final answer
-
According to Paragraph 24(a) of the EBA/GL/2015/08 on the management of interest rate risk arising from non-trading activities, the standard shock should be based on a sudden parallel +/- 200 basis point shift of the yield curve, applying a 0% floor. If interest rates in the base scenario are in a negative range, they should not be raised to zero when applying the -200bps/+200bps scenarios. Instead, the downward shock should be floored at the level of the current negative rate. The floor does not apply to upward shocks.
- Status
-
Archive
- Answer prepared by
-
Answer prepared by the EBA.
- Note to Q&A
-
Update 26.03.2021: This Q&A has been archived as the issue is now explained in paragraphs 94 and 115(k) of EBA/GL/2018/02.
