Regulatory Reporting for Interest Rate Risks in the Banking Book (IRRBB)

The European Banking Authority (EBA) published its final report on the new regulatory reporting requirements for interest rate risks in the banking book (IRRBB) on 31 July 2023. The revised draft includes the Implementing Technical Standards (ITS), the proposed reporting templates and a description of the relevant data fields. Enforcing these upcoming requirements may be a priority for supervisors given increasing interest rates and recent events in the banking industry showing the importance of sufficient interest rate risk management.

The requirements apply to all European banks, whereby simplified reporting obligations are defined for smaller and medium-sized institutions. It is planned to submit the data in a quarterly rhythm. In principle, the data are to be provided both at the group level and at the individual institution level.

With the final package, the supervisory authority defines how the results of the Supervisory Outlier Test (SOT) defined in 2022 are to be transmitted. However, the data requirements go far beyond the pure SOTs and also include, for example, granular fixed-interest balances, model parameters and market value changes in stress scenarios. The supervisory authority has justified the comprehensive reporting requirements among other things with the interest rate turnaround and the increased inflation in 2022 and 2023.

The first reporting of the IRRBB templates is required by 30 September 2024. In addition, directly ECB supervised banks must submit the reports as part of the Short-Term-Exercise (STE), starting as of the reporting date 31.12.2023.

The granularity of the required results will pose major challenges for many banks and in some cases require extensive adjustments to the risk systems and reporting processes. In our technical article we describe the EBA's plans in detail, examine what effects can be expected and show how financial institutions can already prepare for them now.