Strategic Equity Risk

Overview

Article 169 defines the strategic-equity shock branch within equity risk.^[1]

Strategic equity receives a distinct shock because Article 171 treats certain related-undertaking holdings as structurally different from ordinary traded equity positions. Article 169 applies an instantaneous decrease equal to 22% to Type 1 and Type 2 equity investments in related undertakings where those investments are of a strategic nature.^[1][2] Under Article 87, Basic Own Funds are defined as the excess of assets over liabilities both valued on a market-consistent basis, where qualifying subordinated liabilities are excluded from the liability figure.^[3] A full undertaking-specific BOF impact may therefore require recalculating technical provisions under Article 83.

Article 83 mandates that the following assumptions apply in any standard formula scenario-based module or sub-module calculation: * The risk margin does not change. * Deferred tax assets and liabilities do not change. * Future discretionary benefits do not change. * Management actions during the scenario are not reflected.

This page does not model any liability-side response or decide whether an investment is strategic. It assumes the undertaking has already documented the Article 171 strategic relationship evidence.

Input Terms

• Strategic Equity Exposure: The value of equity investments already evidenced as strategic equity investments under Article 171.^[2]
• Strategic Equity Shock Factor: The prescribed Article 169 instantaneous decrease for strategic equity investments at the regulatory 22% calibration.^[1]

Technical Rationale

The Article 169 strategic-equity branch puts classification evidence ahead of calibration choice. The 22% shock is justified only where the Article 171 relationship evidence supports strategic treatment; otherwise the exposure remains subject to the ordinary Type 1 or Type 2 equity-risk branch before Article 168 aggregation.

Important Notes

• Evidence not modelled here: The Article 171 strategic-equity evidence belongs in governance documentation, not in the numeric output.
• No symmetric adjustment: The 22% strategic-equity shock does not add the Article 172 symmetric adjustment.
• Branch boundary: This page does not model any liability-side response and is not a complete equity SCR calculation by itself.
• Reporting: The displayed result is intended to support the corresponding equity-risk component for the S.25.01.01 standard-formula reporting view.^[4]