Economic value of equity (EVE)
Regulatory Definition
A specific form of EV measure where equity is excluded from the cash flows.
EBA GL/2022/14
What This Actually Means
Take your EV calculation but don't assign any cashflows to equity — equity is the residual that's being measured, not a liability to model. EVE = PV(assets) minus PV(liabilities), where liabilities exclude equity. The change in EVE under rate shocks tells you how much economic value shareholders would lose or gain.
Where It Matters
This is the metric used in the supervisory outlier test (SOT). The EVE change under prescribed rate shocks must not exceed 15% of Tier 1 capital (EBA) or equivalent thresholds in other jurisdictions. The single biggest sensitivity driver is your NMD repricing assumptions — a one-year shift in assumed deposit duration can swing EVE by hundreds of basis points.
EV but excluding equity from the liabilities. The key metric for the SOT.