EBA欧洲银行-Annex_IRRBB_000_14页_244kb

Summary of CEBS Feedback to Consultation on CP11: Interest Rate Risk in the Banking Book

Core Content

The CEBS feedback document outlines the responses received to the consultation paper CP11, which focuses on the technical aspects of the management of interest rate risk arising from non-trading activities under the supervisory review process (SREP). The guidelines aim to support convergence in practices across the EU while ensuring alignment with the Basel Committee's principles.

Main Points and Key Information

1. Purpose of the Guidelines

• CEBS acknowledges the need for guidance on IRRBB to avoid duplication with the Basel Committee's IRR principles.
• The guidelines are intended to complement the Basel Committee's work, particularly in the context of EU-specific practices and the SREP framework.
• The focus is on non-trading activities, as IRR in the trading book is addressed under Pillar 1.

2. Level of Detail

• Some respondents found the guidelines overly prescriptive, potentially limiting the freedom of institutions to choose their own methods.
• CEBS has responded by clarifying the wording, emphasizing that institutions should be able to demonstrate their approaches rather than be required to follow specific steps.
• The principle IRRBB 1 has been adjusted to reflect this shift in tone and approach.

3. Institutions' Use of Internal Methods

• There was criticism that the consultation paper did not clearly state that institutions are responsible for choosing and applying their internal IRRBB methodologies.
• CEBS reaffirms that institutions bear full responsibility for their IRRBB management, and this has been explicitly stated in Principle IRRBB 1.

4. Economic Value Perspective vs. Earnings Perspective

• A respondent questioned the focus on economic value, arguing that it may not reflect real-world dynamics.
• CEBS maintains that the economic value approach provides a more comprehensive view of long-term effects, while the earnings approach is a supplementary measure.
• A definition of economic value has been added to clarify its meaning.

5. Scope of Application

• The guidelines are intended to be applied at the consolidated level for banking groups, with consideration for local parameters.
• CEBS does not intend to prescribe a centralised or decentralised approach but allows flexibility based on the institution's needs.
• For cross-border groups, coordination by home supervisors is essential to ensure consistency.

6. Standard Shock

• There was debate on the appropriateness of the 200 basis point standard shock, with some arguing it is too high or not relevant to local conditions.
• CEBS maintains that the standard shock serves as a starting point and is not a one-size-fits-all solution.
• National competent authorities have committed to periodically review and adjust the standard shock level, ensuring it remains relevant and proportionate.
• A proposal was made to use currency-specific standard shocks, which CEBS supports for future consideration.

7. Pillar 2 Wider Issues

• Some respondents discussed broader Pillar 2 concerns, such as the use of capital add-ons and the importance of proportionality.
• CEBS reaffirms that Pillar 2 is an overall assessment of risks, and capital add-ons are among the possible prudential measures.
• The guidelines should not impose additional disclosure requirements unless necessary for supervision.

8. Changes Made by CEBS

• The wording of Principle IRRBB 1 has been revised to emphasize demonstration over prescription.
• The economic value approach is highlighted as the primary supervisory focus, with the earnings approach as a supplementary measure.
• The scope of IRRBB is aligned with the SREP framework, and the guidelines do not require a standardized reporting format.
• The standard shock remains a central element, but its implementation is subject to national review and adjustment.
• A web-based disclosure framework is recommended to ensure transparency and consistency in supervisory practices.

Conclusion

CEBS has made adjustments to the consultation paper based on feedback to ensure that the guidelines remain principles-based, flexible, and aligned with the SREP framework. The focus remains on non-trading activities, with an emphasis on economic value as the main supervisory metric. While the standard shock is retained, its application is subject to national discretion and periodic review. The feedback also highlights the importance of coordination among supervisors and proportionality in applying the guidelines across different institutions and market conditions.