13. How is the balance between sharing profits and losses assessed?

For the assessment of this criterion, the maximum return that the investor can obtain is compared with the maximum risk to which he is exposed as a result of the formula used in the product. The amounts can be calculated at net present value.

For the purposes of calculating the maximum return, account is taken of the fixed and the variable returns, insofar as the variable return is determined on the basis of the same underlying value that determines the potential loss. Thus, in the case of a structured product whose capital repayment at maturity depends on the performance of a share index, and that offers both a yearly variable return that depends on an interest rate and a one-time variable return at maturity depending on the same share index, account is taken only of the one-time variable return at maturity, and not of the annual variable rate.

This criterion requires an overall assessment for the entire lifetime of the structured product. It is not enough for it to fulfil the criteria solely at maturity. The criteria are not fulfilled, therefore, if on interim due dates the investor's participation in any increase (or, conversely, the risk to which the investor's counterparty is exposed) is lower than the risk which the investor incurs (or conversely, the profit that the investor's counterparty can earn) when the underlying value falls, even if the effective loss for the investor is calculated only at maturity (so-called autocallables without capital protection).

A term deposit with a fixed interest rate in a given currency that is repaid in another currency in cases where the latter currency has fallen in value against the former currency, is incompatible with this criterion; the investor’s objective in investing in such a product is therefore not relevant in such a case.