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

The European Banking Authority (EBA) launched a consultation on the future regulatory reporting requirements for interest rate risk in the banking book (IRRBB) on 31 January 2023. The consultation includes the Implementing Technical Standard (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 national financial institutions, i.e. "small and non-complex institutions" (SNCIs). It is planned to include the data in the quarterly COREP reports. In principle, the data are to be provided both at the group level and at the individual institution level.

With the consultation, 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 justifies the comprehensive reporting requirements among other things with the interest rate turnaround and the increased inflation since 2022.

As part of the consultation process, the EBA is giving banks the opportunity to submit feedback and questions and ambiguities on the proposed package until 2 May 2023. The supervisor then plans to finalise the technical standard and submit it to the EU Commission within three months of the consultation period. Based on past EBA papers on IRRBB, it is expected that the main reporting requirements in the EBA draft will also be finally applied.

The first reporting of the IRRBB templates, as part of the quarterly COREP process, is expected for 30 June 2024.

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