EBA欧洲银行-EBA-GL-2015-08-GL-on-the-management-of-interest-rate-risk-_77页_855kb

EBA Guidelines on Interest Rate Risk in the Banking Book (IRRBB)

Core Content

The European Banking Authority (EBA) has updated and replaced the original CEBS guidelines on interest rate risk arising from non-trading activities, which were published on 3 October 2006. These updated guidelines, titled "Guidelines on the management of interest rate risk arising from non-trading activities," apply to the "interest rate risk in the banking book" (IRRBB) as defined in Article 98(5) of Directive 2013/36/EU. The updated guidelines are addressed to competent authorities and focus on the identification and mitigation of IRRBB by institutions, including credit institutions and investment firms.

The guidelines are structured into two major parts:

1. High-level guidelines – an updated version of the original guidelines, covering the principles of IRRBB management (IRRBB 1 to 9, with an added IRRBB 4.1 on internal governance).
2. Detailed guidelines – further specifying the high-level guidelines, covering five key areas: scenarios and stress testing, measurement assumptions, methods for measuring interest rate risk, governance of interest rate risk, and identification, calculation, and allocation of capital to IRRBB.

The updated guidelines also include Annex A on IRRBB measurement methods and Annex B on a sophistication matrix for IRRBB measurement, which helps institutions choose appropriate tools and methods based on their business model and risk profile.

Main Points

1. Scope and Purpose

• The guidelines apply to interest rate risk in the banking book, not trading activities.
• They aim to ensure that institutions manage IRRBB prudently and appropriately, with a level of sophistication that is proportionate to the size and complexity of their business model.
• The "standard shock" is defined as a minimum 200 basis point change in interest rates, which may be adjusted based on economic developments.

2. Key Changes from the Original Guidelines

• The high-level guidelines (IRRBB 1–9) have been updated and improved for clarity and consistency.
• A new high-level guideline (IRRBB 4.1) has been added, emphasizing the importance of robust internal governance arrangements for IRRBB.
• The calculation of the standard shock has been clarified, including the use of yield curves and behavioral assumptions.

3. Detailed Guidance Areas

• Scenarios and stress testing: Institutions must ensure that their scenarios and stress tests are adequate to identify all material interest rate risks.
• Measurement assumptions: Includes behavioral assumptions for customer accounts and corporate planning assumptions for equity capital.
• Methods for measuring interest rate risk: A range of quantitative tools and models are described, including static and dynamic models.
• Governance of interest rate risk: Institutions must have effective internal governance structures to manage IRRBB.
• Capital identification, calculation, and allocation: Guidance is provided on how institutions should allocate capital to cover IRRBB.

4. Proportionality Principle

• The guidelines emphasize the principle of proportionality, meaning the complexity and intensity of IRRBB management should be appropriate to the institution's size and business model.
• Institutions must ensure that their assumptions and models reflect actual risk profiles and not just contractual terms.

5. Accounting Considerations

• While the EBA does not set accounting standards, it highlights the importance of being aware of the impact of accounting policies on IRRBB.
• Institutions should not allow accounting considerations to drive their risk management approach; instead, they should prioritize business risk management.

6. Supervisory Expectations

• Competent authorities will assess institutions' compliance with the guidelines.
• Institutions must develop their own systems and stress tests that are consistent with their risk profiles.
• The "standard shock" outlier test is used to ensure consistency in supervisory comparisons.

Key Information

• The updated guidelines repeal the original 2006 CEBS guidelines.
• The "standard shock" is set at a minimum of 200 basis points and is subject to review.
• The sophistication matrix in Annex B helps institutions select appropriate measurement tools and levels of complexity.
• Stress testing is a key component of IRRBB management, with guidance on scenarios and modeling assumptions.
• Behavioral assumptions are critical in IRRBB measurement, especially for non-maturity deposits and equity capital.
• Proportionality is a core principle, ensuring that the level of sophistication in IRRBB management is commensurate with the institution's risk profile.
• Accounting policies are a secondary concern, not a primary driver of risk management.
• The guidelines are effective from 1 January 2016, with a two-month compliance reporting deadline after publication in the official EU languages.

Additional Notes

• The EBA acknowledges that the Basel Committee is reviewing its own guidelines on interest rate risk, and may update these guidelines if relevant EU legislation changes.
• The ICAAP (Internal Capital Adequacy Assessment Process) is central to the management and assessment of IRRBB.
• The guidelines do not prescribe a specific measurement method, but encourage institutions to use a combination of tools that reflect their unique risk exposure.