Balance sheet and solvency capital requirement - market risk: a conditional check (S.02.01, S.26.01, EIOPA rule BV565_1)

The rule in plain words

The headline gives only the template and the kind of check, because the rule is too long to say in a headline. The plain words above say all of it.

EIOPA writes it out as separate checks, one for each table or return it covers. Line4 Check runs two of them (BV565_1-3 and BV565_1-5), and a failure names the one that failed.

What to do if your return fails it

1. 01Open the tables below and find the cells the rule reads.
2. 02The check applies only when its first part holds in your return. When it does, the second part must hold too: fix the second part, or correct the first.
3. 03EIOPA allows a small rounding difference, worked out from the decimals each value is reported with.
4. 04It runs only when your filing indicators mark S.02.01 and S.26.01 as reported.
5. 05This is a warning. It does not stop the return on its own, but your supervisor may ask you to explain it.

The cells it reads

Which returns it applies to

Line4 Check runs it on annual solo (ARS) and annual group (ARG) returns on EIOPA taxonomy 2.10.0. EIOPA applies it to annual group (ARG) and annual solo (ARS) returns, as a warning.

EIOPA’s own words and formula

In EIOPA’s list of validations, word for word:

The capital charge for the interest rate shock down reported in S.26.01 - Solvency Capital Requirement - Market risk should be equal to the loss in the value of assets minus liabilities (after the loss absorbing capacity of technical provisions) after the shock, with a minimum of zero, unless there are subordinated liabilities reported in S.02.01.

Other rules on Balance sheet (S.02.01)

Every Solvency II rule on S.02.01

Checks like this one, run at the point of submission, are the first step to real-time supervision. Line4 builds SupTech software for financial regulators that runs checks like these as each return arrives.