IRRBB series: Heatmap implementation

IRRBB remains a critical focus area for the EBA. In the past, they have released multiple guidance documents, including the Prudential Package in October 2022, the IRRBB Heatmap in January 2024, and the first phase of the Implementation Report. These releases aim to clarify supervisory expectations and promote consistency in practices among institutions.

In this report, we discuss Phase 2 of the IRRBB Implementation Report, released in February 2026, which provides further guidance on key IRRBB framework components that include:

the monitoring of the 5-year cap;
commercial margin modelling;
hedging strategies;
and the CSRBB perimeter definition.

We also discuss the EBA’s next steps and how our team of IRRBB specialists can help you stay relevant in a dynamic IRRBB environment.

Ian Nelson

Head of Regulatory, Head of Financial Services

KPMG in Ireland

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Setting the scene – The EBA’s IRRBB roadmap

Past guidance
The EBA has progressively strengthened its IRRBB framework in response to heightened interest-rate volatility. Key milestones include:
- The prudential package (October 2022)
- The IRRBB Heatmap (January 2024)
- Phase 1 of the Implementation Report, outlining short- to medium-term actions to support institutional enhancements
The latest
Phase 2 builds on earlier publications and sets out recommendations across four focus areas. Key themes include:
- Enhancing regulatory dialogue
- Reinforcing consistency across models and assumptions
- Ensuring alignment with each bank’s business model and operating environment
Next steps

The EBA’s forward agenda highlights expected areas of supervisory engagement, including the monitoring of the 5-year cap, further development of analytical tools, refinement of CSRBB perimeters, and contributions to the IASB’s DRM project.

KPMG insights: EBA key messaging

The EBA’s medium- to long-term implementation plan centres on consistency, model integrity, and robust supervisory dialogue. Phase 2 provides institutions with clearer expectations and direction as IRRBB frameworks continue to evolve.

Monitoring of the 5-year cap

Harmony vs. flexibility: The 5-year cap remains a harmonised benchmark supporting sound NMD stability modelling. Flexibility is retained for exceptional institutions where a longer cap is justified
Commercial margin modelling
- Compliance - Institutions must apply a constant spread in SOT on NII, independent of interest-rate scenarios, in line with regulatory requirements.
- Special products - Differentiated modelling assumptions applied to items that exhibit material behavioural characteristics, like NMDs and products with embedded optionality, are not to be extended to other products not exhibiting such characteristics.
CSRBB perimeter
Consistency and scope: Current industry practice varies in defining and applying the CSRBB perimeter. The EBA emphasises:
- Consistency across EVE and NII perimeters
- Inclusion of CSRBB in ICAAP where material
- Extension of scope to IFRS 13 Level 1–3 instruments, unless strong economic grounds support exclusion
Hedging strategies

Alignment and control: Hedging practices should reflect product characteristics and balance both EVE and NII perspectives. Strong governance, regular back-testing, and clear documentation are essential to demonstrating effectiveness.

Graphics insight

Way forward: KPMG’s offerings

Behavioural modelling

Development and validation support in designing, calibrating, and validating behavioural models consistent with regulatory expectations and banks’ balance-sheet profiles.
OSI support and regulatory finding remediation

Targeted assistance to address supervisory observations, strengthen internal processes, and embed sustainable IRRBB practices.
Peer benchmarking, industry insights, and tailored solutions

Comparative assessments, market insights, and bespoke enhancements informed by leading practices across Europe

Key takeaways

Transparent dialogue

The EBA’s updated recommendations reinforce the importance of transparent regulatory dialogue.
Standardised approaches

Standardised approaches improve comparability of IRRBB frameworks across institutions.
Modelling and hedging

Aligning modelling and hedging strategies with product characteristics enhances clarity, consistency, and supervisory confidence.