Basel Committee Publishes Standards for Interest Rate Risk in the Banking Book

Basel Committee Publishes Standards

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

Angela Manolache

Partner, Advisory, Head of Financial Services

KPMG in Romania

Advisory Newsflash

The standards revise the Basel 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. 

Key enhancements to the 2004 Principles include:

  • Additional guidance on the expectations for a bank's IRRBB management process in areas such as the development of shock and stress scenarios and behavioral 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;
  • An updated standardized framework, which could be mandated by supervisors or banks may choose to adopt; and
  • A stricter threshold for identifying outlier banks, by reducing the threshold from 20 percent of a bank's total capital to 15 percent of a bank's Tier 1 capital.Banks will be expected to implement the standards in 2018.

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