Interest Rate Risk in the Banking Book: 2017 Deloitte White Paper
Taking a closer look at the BCBS Standards
In April 2016, the Basel Committee on Banking Supervision (BCBS) issued Final Standards on IRRBB that replace the 2004 Principles for the management and supervision of interest rate risk. The new standards set out the Committee’s expectations on the management of IRRBB in terms of identification, measurement, monitoring, control and supervision. The updated IRRBB Principles reflect changes in market and supervisory practices due to the current low interest rate environment, and provide methods and models to be used by banks in a wider and enhanced risk management framework.
In light of the significant changes introduced by the BCBS standards on IRRBB, Deloitte EMEA invited European and South African banks to participate in an online survey. The main objective of the survey was to gauge the readiness of firms to manage the new context of interest rates, and evolve their IRRBB practice towards comprehensive framework of interest rates risk governance, models and systems.
The survey was undertaken between September and December 2016 across 9 European and South African entities. It involved 37 leading banking groups of different sizes, employing various business models. Balance sheet totals ranged from 30 billion to 500 billion euro and business focus ranged from retail to cooperative, private, investment, commercial and universal services. The survey focused on the assessment of the banks’ current practices vis-à-vis the new IRRBB framework through six detailed sections and more than 80 specific questions on ALM and IRRBB practices.