Interest rate risk in the banking book (IRRBB)
On 21 April 2016 the Basel Committee on Banking Supervision issued standards for Interest Rate Risk in the Banking Book (IRRBB).
"The standards revise the Committee's 2004 Principles for the management and supervision of interest rate risk,
which set out supervisory expectations for banks' identification,
measurement, monitoring and control of IRRBB as well as its supervision.
The key enhancements to the 2004 Principles include:
- More extensive guidance on the expectations for a bank's IRRBB
management process in areas such as the development of interest rate
shock scenarios, as well as key behavioural and modelling assumptions to
be considered by banks in their measurement of IRRBB;
- Enhanced disclosure requirements to promote greater consistency,
transparency and comparability in the measurement and management of
IRRBB. This includes quantitative disclosure requirements based on
common interest rate shock scenarios;
- An updated standardised framework, which supervisors could mandate their banks to follow or banks could choose to adopt; and
- A stricter threshold for identifying outlier banks, which is has
been reduced from 20% of a bank's total capital to 15% of a bank's Tier 1
capital.
The standards reflect changes in market and supervisory practices
since the Principles were first published in 2004, which is particularly
pertinent in light of the current exceptionally low interest rates in
many jurisdictions. The revised standards, which were published for
consultation in June 2015, are expected to be implemented by 2018.
The Basel Committee wishes to thank all those who contributed time
and effort to express their views during the consultation process."
Interest rate risk in the banking book. Bank for International Settlements. [online]. 21.4.2016 [cit. 2016-07-29]. Available at: http://www.bis.org/bcbs/publ/d368.htm