Vida FatemiThe Basel Committee has published a consultation on targeted adjustments to its 2016 standard on interest rate risk in the banking book (IRRBB). Under the IRRBB standard, banks are required to calculate measures of interest rate risk for their banking book exposures. These measures are based on a specified set of interest rate shocks for each currency for which the bank has material positions.
The Committee made a commitment to periodically reviewing the specified shock sizes and a review was initiated in the Committee’s 2023-24 work programme. As a result of the review, a set of adjustments to the calibration of the specified interest rate shocks were proposed, as was an adjustment to the current methodology used to calculate the shocks.
These changes are attempting to address the current problems with how the current methodology captures interest rate changes during periods when interest rates are close to zero.
Consultation closes on 28 March 2024.