1. Interest rate shock scenarios and shock sizes

The six interest rate shock scenarios for measuring EVE under the standard EVE outlier test are:

• (i) parallel shock up;
• (ii) parallel shock down;
• (iii) steepener shock (short rates down and long rates up);
• (iv) flattener shock (short rates up and long rates down);
• (v) short rates shock up; and
• (vi) short rates shock down.

Institutions should apply the six above-mentioned interest rate shock scenarios to capture parallel and non-parallel gap risks for EVE. These scenarios are applied to IRRBB exposures in each currency separately for which the institution has material positions¹⁷ .

The shock size for the six interest rate shock scenarios is based on historical interest rates. More precisely, for capturing the local interest rate environment and cycle, a historical time series ranging from 2000 to 2015¹⁸ for various maturities is used to calculate the parallel, short-end (‘short’) and long-end (‘long’) shocks for a given currency. However, deviations from the above-mentioned 16-year period are permitted if they better reflect a particular jurisdiction’s idiosyncratic circumstances.

Table 1 displays the values calculated for the parallel, short and long interest rate shocks for selected currencies. The shocks capture the heterogeneous economic environments across the jurisdictions. These are then used to calculate the shocks for different maturities of the yield curve to create the interest rate shock scenarios as per the methodology explained below.

Table 1. Specified size of interest rate shocks

ARS AUD BRL CAD R � CHF shocktype CNY , c EUR GBP HKD IDR INR Parallel 400 300 400 200 100 250 200 250 200 400 400 Short 500 450 500 300 150 300 250 300 250 500 500 Long 300 200 300 150 100 150 100 150 100 350 300

JPY KRW MXN RUB SAR SEK SGD TRY USD ZAR Parallel 100 300 400 400 200 200 150 400 200 400 Short 100 400 500 500 300 300 200 500 300 500 Long 100 200 300 300 150 150 100 300 150 300

¹⁷ Material positions are defined in section 4.5, ‘Supervisory outlier test’.

¹⁸ The EBA may envisage a recalibration in due course.

1. Forbhreathnú

1.1 Tagairtí

1.2 Ceanglais aitheanta

1.3 Caighdeáin ghaolmhara

2. Ceanglais aitheanta

3. Caighdeáin ghaolmhara

• EBA - Published by the European Banking Authority at https://www.eba.europa.eu/