BASEL COMMITTEE ISSUES IRRBB STANDARDS

The Basel Committee on Banking Supervision issued standards for Interest Rate Risk in the Banking Book (IRRBB) on 21 April 2016.

 

The standards follow the Committee’s consultation on IRRBB in June 2015, and based on the feedback from the industry, the Committee moves forward with an enhanced Pillar 2 approach, instead of an alternative standardised Pillar 1 approach. The Committee states that “the heterogeneous nature of IRRBB would be more appropriately captured in Pillar 2”.

 

In short, the main updates to the standards include added guidance on expectation for IRRBB management process, including development of stress and shock scenarios and modelling assumptions. Furthermore disclosure requirements are updated to ensure consistency, transparency and comparability. The updates also contain a standardised framework and a new threshold for outlier banks.

 

The IRRBB standards are to be implemented by 2018. They primarily concern large internationally active banks on a consolidated basis but supervisors have a choice to apply the standards to other significant institutions as well.

 

 

 

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