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Annex I

ANNEX

Formulae to be used for the purpose of aggregating AVAs under Article 9(6), Article 10(7) and Article 11(7)

Formula for Method 1



APVA

=

(FV – PV) – α · (FV – PV)

= (1 – α) · (FV – PV)

AVA

=

Σ APVA

Formula for Method 2



APVA

=

max {0, (FV – PV) – α · (EV – PV)}

= max {0, FV – α · EV – (1 – α) · PV}

AVA

=

Σ APVA

Where:

FV

=

The valuation exposure-level fair value after any accounting adjustment applied in the institution’s fair value that can be identified as addressing the same source of valuation uncertainty as the relevant AVA,

PV

=

The valuation exposure-level prudent value determined in accordance with this Regulation,

EV

=

The expected value at a valuation exposure level taken from a range of possible values,

α

=

The aggregation factor,

APVA

=

The valuation exposure-level AVA after adjusting for aggregation,

AVA

=

The total category-level AVA after adjusting for aggregation.

Institutions shall set the aggregation factor ‘α’ at 66 % until 31 December 2020, after which they shall set the aggregation factor at 50 %.’

In force

Version from: 26/06/2020

Amendment History