Interest Rate Risk in the Banking Book: 2017 Deloitte Survey

Taking a closer look to the BCBS Standards

In April 2016, the Basel Committee on Banking Supervision(BCBS) issued Final Standards for 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 exceptionally low interest rates and provide methods and models to be used by banks in a wider and enhanced risk management framework.

Key insights and results of the IRRBB survey

1.the introduction of a dynamic perspective in terms of integration with planning & forecasting departments (57% of the banks),
2.the institution of a more sophisticated stress testing framework with respect to the implementation and management of enhanced shock scenarios and more flexible system solutions (51% of the banks),
3.the use of the behavioural models both on methodological and modelling sides (49% of the banks).

What our experts say

Following the publication in June 2016 of the new Standards on Interest-Rate Risk in the Banking-Book (IRRBB) by the Basel Committee on Banking Supervision (BCBS), the Deloitte EMEA IRRBB/ALM working group as part of Basel 3 proposition invited European and South African banks to participate in an online survey to assess their current state of readiness against the new Basel Standards.

Thirty-seven banking groups, from 10 different EMEA countries, have responded to the survey, five of which are from South Africa. The most important results of the survey have been highlighted in this brochure, which will be followed by a white paper which will be published in the upcoming weeks.

The survey is very timely as regulators around the world, including the South African Reserve Bank (SARB) and the European Central Bank (ECB), look to ensure that the requirements of the revised IRRBB Standards are implemented and embedded within banking groups within their jurisdiction during 2017 and going forward.

How can Deloitte help

Deloitte’s ALM & IRRBB Management solutions evolves along with the concurrent financial markets’ and regulatory challenges for improving interest rates risk identification, measurement, valuation, reporting and monitoring, hedging strategies and management governance.
We can help your perform the following interest rate risk management solutions in the banking book activities:
• IRRBB Identification
• IRRBB Measurement and Mitigation
• IRRBB Governance

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