Interest rate risk in the banking book
The standards reflect changes in market and supervisory practices since the Principles were first published in 2004. The revised standards, which were published for consultation in June 2015, are expected to be implemented by 2018. The key enhancements to the 2004 Principles include:
- More extensive guidance on the expectations for a bank's IRRBB management process in areas such as the development of interest rate shock scenarios, as well as key behavioural 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. This includes quantitative disclosure requirements based on common interest rate shock scenarios;
- An updated standardised framework, which supervisors could mandate their banks to follow or banks could choose to adopt; and
- A stricter threshold for identifying outlier banks, which is has been reduced from 20% of a bank's total capital to 15% of a bank's Tier 1 capital.