EBA · 2023_6819 Rejected question

Aggregation of P&L for Net Interest Income

Regulation
Directive 2013/36/EU (CRD)
Article
98, para. 5a
Topic
Accounting and auditing
Submitted by
Credit institution
Submitted
2023-06-05
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Question

In Article 22 of draft EBA/RTS/2022/10, it stated to apply 50% to profit when aggregating P&L at currency to get total NII.  If the stress NII at currency level are all profits (as seen in our calculation under +shocks scenario), do I apply 50% to each profit, or profit in one currency should be allowed 100% (if so, should it be the reporting currency, or any chozen currency)?

Background

I think the rationale of 50% is to offset profit with loss, assuming the correlation between ccy pairs is not 100%. In a simple world, if the whole portfolio has one currency only, then there is no need to apply 50%. So if we apply 50% to each profit, that’s underestimate P&L. This is not covered in the guideline.
No answer published yet.

Original source: European Banking Authority, Q&A ID 2023_6819

This Q&A is published by European Banking Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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