EBA欧洲银行-EBA-GL-2015-08_EN_GL-on-IRRBB_28页_465kb

EBA Guidelines on the Management of Interest Rate Risk Arising from Non-Trading Activities

Core Content

The EBA Guidelines provide a comprehensive framework for the management of Interest Rate Risk in the Banking Book (IRRBB) arising from non-trading activities. These guidelines are issued under Article 16 of Regulation (EU) No 1093/2010 and are intended to be incorporated into the supervisory practices of competent authorities and financial institutions.

Main Points

• Compliance and Reporting Obligations:

  • Guidelines are issued under Article 16 of Regulation (EU) No 1093/2010.
  • Competent authorities must notify the EBA by 07.12.2015 whether they comply or intend to comply with the guidelines, or provide reasons for non-compliance.
  • Any changes in compliance status must also be reported to the EBA.
  • The CEBS guidelines from 2006 are repealed with effect from 1 January 2016.

• Scope and Definitions:

  • The guidelines cover the identification, management, and mitigation of IRRBB.
  • IRRBB includes:
    • Repricing risk (mismatch in timing of assets and liabilities).
    • Yield curve risk (changes in the slope and shape of the yield curve).
    • Basis risk (differences in re-pricing conditions).
    • Option risk (embedded and automatic options in assets or liabilities).
  • The guidelines do not apply to credit spread risk.

• Implementation:

  • Guidelines apply from 1 January 2016.
  • Institutions should use their own internal capital allocation methodologies rather than relying solely on the standard shock calculations.

• Management of IRRBB:

  • Proportionality: Institutions must apply the guidelines proportionally based on their size, complexity, and activity intensity.
  • IRRBB 1 - Internal Capital: Institutions should ensure their internal capital is adequate to cover IRRBB, considering both economic value and earnings risks.
  • IRRBB 2 - Measurement of IRRBB: Institutions should measure IRRBB in terms of economic value (EV) and net interest income (NII) or earnings. They should not rely on the standard shock method but instead use their own assumptions and methods.
  • IRRBB 3 - Interest Rate Shock Scenarios: Institutions should routinely measure EV and NII/earnings sensitivity under various interest rate scenarios, including yield curve shifts, basis risk, and changes in customer behavior. More complex scenarios should be considered for larger institutions.
  • IRRBB 4.1 - Internal Governance Arrangements: Institutions must implement robust internal governance structures for IRRBB, ensuring that management bodies are responsible and that models are regularly validated.
  • IRRBB 4.2 - IRRBB Policies: Institutions should have well-documented policies addressing all IRRBB issues, including the definition of the banking book, behavioral assumptions, and corporate planning.

Key Information

• Standard Shock: The standard shock is defined as a sudden parallel shift of ±200 basis points in the yield curve, with a 0% floor. If the actual historical interest rate change is greater, that should be used instead.
• Yield Curve Assumptions: Institutions should use a 'risk-free' yield curve for calculations, excluding credit or liquidity spreads. An example is the 'plain vanilla' interest rate swap curve.
• Equity Capital: Equity capital should be excluded from liabilities to accurately assess the impact of stress scenarios on economic value.
• Repricing Assumptions: For accounts without specific repricing dates, institutions should consider the average maturity of customer balances, capped at a maximum of 5 years.
• Measurement Methods:
  • Institutions should use a range of quantitative tools and models, not just a single measure.
  • Methods include gap analysis, partial durations, and inventory of instrument groups based on different interest rates.
  • Institutions should consider multiple measures, especially for more sophisticated risk management.
• Sophistication Levels: Table 3 in Annex B outlines different sophistication levels for each quantitative tool and measure, which can be used to determine the appropriate level of detail for risk measurement.
• Stress Testing: Institutions should perform stress tests that consider a variety of scenarios, including extreme yield curve shifts and basis risk, and integrate IRRBB into their overall stress testing programs.
• Corporate Planning Assumptions: Institutions should consider the investment maturity profile of equity capital and ensure that it balances income stabilization with risk exposure. These assumptions should be part of the corporate planning cycle and not altered solely based on future interest rate expectations.

Annexes

• Annex A provides a list of IRRBB measurement methods, including examples of how to calculate the impact of interest rate changes.
• Annex B includes a Sophistication Matrix that outlines the complexity and granularity of different measurement tools and methods, helping institutions determine the appropriate level of sophistication for their risk management processes.

Conclusion

The EBA Guidelines aim to ensure that financial institutions effectively manage IRRBB through proportionate, robust, and well-documented internal governance and risk management practices. They emphasize the use of diverse measurement tools, the importance of scenario analysis and stress testing, and the need to incorporate both economic value and earnings risk into the overall risk framework. Institutions are encouraged to use their own methodologies and assumptions, while also aligning with the EBA's recommended standards.