Second, to limit capital arbitrage between the trading book and the banking book, as well as between banking book portfolios that are subject to different accounting treatments. Principles for the management and supervision of interest. Interest rate risk in the banking book irrbb more specifically refers to the current or prospective risk to the bank s capital and earnings arising from adverse movements in interest rates affect the institutions banking book that positions. Bcbs standard for interest rate risk in the banking book objectives, approaches and disclosure meeting on irrbb and the revised standardised approach for credit risk sao paulo, brazil 2728 april 2016 jeff miller fsi connect relationship manager financial stability institute. A response to the basel committees consultative document. Due to different fixed interest rates of assets and liabilities allocated to the banking book, credit institutions are exposed to a risk of changing interest rates on the money and capital markets. More extensive guidance on the expectations for a banks irrbb management process in areas such as. Bcbs cd on interest rate risk in the banking book irrbb, september 2015 from the spanish banking association aeb1, we appreciate the opportunity to respond to the bcbs consultative document cd on interest rate risk in the banking book irrbb issued on the 8th june. Its implementation is set as 1 january 2016, however, in june the basel committee for banking supervision bcbs published a consultative document cd on the interest rate risk in the banking book irrbb. Moreover, a quantitative impact study qis was published within the basel iii monitoring environment on july 31, 2015 in order. Interest rate risk in the banking book irrbb is part of the basel capital frameworks. Basel iv revised trading and banking book boundary for market. Bcbs standard for interest rate risk in the banking book.
This paper discusses the associations response to the cd. Interest rate risk in the banking book consultative. Cba1 comments on bcbs consultative document on interest rate risk in the banking book. The basel committee on banking supervision bcbs published a consultative document on the implications of fintech for banks and their supervisors the bcbs set up a task force to assess how fintech will affect the banking industry and their supervisors in the near to medium term. Introduction interest rate risk in the banking book or irrbbas defined by the basel committeeis the current or. Implementing bcbs 368 interest rate risk in the banking book. On june 8, 2015 the basel committee for banking supervision bcbs published the consultative paper 319 on interest rate risks in the banking book, which has been developed by the task force on interest rate risk in the banking book tfir over the last years.
When interest rates change, the present value and timing of future cash flows change. These updated principles were the subject of consultation in 2015, when the committee. Risposta dellaifirm al consultative document interest. A revised market risk framework issued for comment by 31 january2014 a. While the joint response supports the goal of ensuring that banks continue to manage irrbb effectively and that appropriate transparency is achieved for stakeholders to properly gauge banks irrbb exposure, it reiterates that these goals can be.
In april 2016, the basel committee on banking supervision issued its final standards for irrbb interestrate risk in the bankingbook. Joint associations response to bcbs consultative document on. Committee for banking supervision bcbs published a consultative document cd on the interest rate risk in the banking book irrbb. The consultative document focuses on future potential scenarios together with the specific risks and. Interest rate risk in the banking book irrbb bankinghub. While the joint response supports the goal of ensuring that banks continue to manage irrbb effectively and that appropriate transparency is achieved for stakeholders to properly gauge banks irrbb exposure, it reiterates that these goals can be pursued. Bcbs consultative document on interest rate risk in the banking.
Osfis current guideline is a concise document that, if not updated and expanded, would not align with revised. The way ahead executive summary interest rate risk in banking book irrbb refers to the current or prospective risk to a bank s capital and earnings arising from adverse movements in interest rates that affect banking book positions. Finma also upgraded the snbfinma interest rate risk. Interest rate risk in the banking book consultative document. In its consultative document, the bcbs proposes to reduce the risk weights for the general interest rate risk class by. French banking federation response to bcbs d319 consultative. Irrbb refers to the current or prospective risk to the bank s capital and earnings arising from adverse movements in interest rates that affect the bank s banking book positions. The new standards will apply from january 2018 onwards but some supervisors have already given a lot of attention to how irrbb is monitored and managed at many banks, given the current concerns about the lingering low interest rate environment. Osfi issued the draft guideline revisions on irrbb for public consultation in october 2018. In the consultative document the bcbs sets out two options for the regulatory treatment of interest rate risk in the banking book irrbb. The clearing house association tch submitted a jointtrades comment letter to the bcbs in response to the consultative document entitled interest rate risk in the banking book. On the 3rd of june 2016, marcus evans held a webinar entitled interest rate risk in the banking book in partnership with oracle for their global financial market webinars portfolio. We fully support the comments of the iif, afme and ebfibfed in.
Joint associations response to bcbs consultative document. Implementing bcbs 368 interest rate risk in the banking. Interest rate risk, credit spread risk, equity risk, foreign exchange risk, commodities risk and default risk for trading book instruments. This paper looks at the standards from a practical implementation point of view and raises some of the main challenges. This consultative document presents two options for the regulatory treatments of. Meeting the practical challenges highlights the new basel committee on banking supervision bcbs standards for irrbb come into force january 1, 2018. Basel committee on banking supervisions bcbs consultative document cd on interest rate risk in the banking book irrbb. Irrbb consultative paper on interest rate risk in the. Iif, together the associations, consultative document.
Jul 20, 2016 on the 3rd of june 2016, marcus evans held a webinar entitled interest rate risk in the banking book in partnership with oracle for their global financial market webinars portfolio. Interest rate risk is a banks exposure to adverse movements in interest rates. Standards on the interest risk in the banking book irrbb. Joint interest rate risk american bankers association.
Jun 09, 2015 the basel committee on banking supervision bcbs has published a consultative document, interest rate risk in the banking book. Revised trading and banking book boundary for market risk presumed assignment to the trading book alternative allocation possible through explicit supervisory approval there is a general presumption that any of the following instruments are being held for at least one of the above. The basel committee on banking supervision bcbs finalised its pillar 2 capital framework for interest rate risk in the banking book irrbb in april 2016. Sep 11, 2015 the iif, together with the ibfed, gfma and isda, submitted a response to the bcbs consultation on interest rate risk in the banking book. Interest rate risk in the banking book how to manage irrbb. Gfma, the institute of international finance iif, international banking federation ibfed, and the international swaps and derivatives association isda provides a joint response on behalf of the industry irrbb working group on the basel committee on banking supervision bcbs consultative document on interest rate risk in the banking book irrbb. Deutsche borse group position paper on bcbs consultative document page 2 of 15 interest rate risk in the banking book 08 june 2015 funds requirements in the eu. Jan 14, 2016 on june 8, 2015 the basel committee for banking supervision bcbs published the consultative paper 319 on interest rate risks in the banking book, which has been developed by the task force on interest rate risk in the banking book tfir over the last years. Cochairs, task force on interest rate risk in the banking book tfir basel committee on banking supervision centralbahnplatz 2 basel, switzerland dear mr. Interest rate risk in the banking book issued by the basel committee on banking supervision japanese bankers association we, the japanese bankers association jba, would like to express our gratitude for this. The consultative document on the risk management, capital treatment and supervision of interest rate risk in the banking book irrbb expands upon and is intended to. Introduction to interest rate risk in the banking book. Bcbs consultative document on interest rate risk in the banking book irrbb download in depth.
This context has led regulators to focus more closely on the interest rate risk in the banking book. Are banks ready for a return to a normal environment. In april 2016, the basel committee on banking supervision published the final standard on capital framework for interest rate risk in the banking book irrbb. The proposal published today presents two options for the capital treatment of interest rate risk in the banking book. Basel committee on banking supervision s consultative document on interest rate risk in the banking book irrbb, intended to ultimately replace the basel committees 2004 principles for the management and supervision of interest rate risk, the undersigned associations would like to draw your attention to some extremely important issues for our. Nii, on the other hand, is always based on cash flows at client rates and thus represents total nii. Archives bcbs basel committee on banking supervision. Therefore, the interest rate risk is inherent to the banking activity and its effective. The new standards will apply from january 2018 onwards but some supervisors have already given a lot of attention to how irrbb is monitored and managed at many banks, given the current concerns about the lingering lowinterest rate environment. Basel iv revised trading and banking book boundary for.
Whitepaper interest rate risk in the banking book irrbb. Risposta dellaifirm al consultative document interest rate. The bcbs updated its guidance in 2016 by issuing interest rate risk in the banking book irrbb. Sep 14, 2015 cochairs, task force on interest rate risk in the banking book tfir basel committee on banking supervision centralbahnplatz 2 basel, switzerland dear mr.
Interest rate risk in the banking book, written by industry expert paul newson, provides a thorough guide to the new regulatory requirements surrounding irrbb and demonstrates the importance of good governance the author explains the nature of interest rate risks in simple language, describing the methods typically used to measure them, with the added advantage of many worked examples. Interest rate risk is a bank s exposure to adverse movements in interest rates. In face of the approaching deadline, interested and impacted parties have shared their comments on irrbb among which febelfin. Dear sirmadam, thank you for the opportunity to comment on the eba consultation on the interest rate risk in the banking book irrbb 1. The standards revise the committees 2004 principles for the management and supervision of interest rate risk, which set out supervisory expectations for banks identification, measurement, monitoring and control of irrbb as. Decoding bcbs market risk capital requirements accenture. Industry and regulatory insights from aba banking journal. A response to the basel committees consultative document on. These standards are intended to replace an earlier guidance set out in the 2004 principles for the management and supervision of interest rate risk4, which laid out the principles and the methods expected to be used by banks for measuring, managing, monitoring and.
A summary of bcbs interest rate risk in the banking book. The revision is reflected especially in the summary, in principles 12 to 15, and in annexes 3 and 4. Interest rate risk wasnt covered explicitly by either basel ii or basel iii but changes are now, finally, afoot. Interest rate risk in the banking book irrbb more specifically refers to the current or prospective risk to the. The new framework replaces its previous version from 2004 and sets out nine principles for banks and three principles for supervisors for the management and supervision of irrbb. Interest rate risk in the banking book how to manage. Basel committee consults on interest rate risk in the banking. Whitepaper implementing interest rate risk in the banking. The new basel committee on banking supervision bcbs standards for irrbb come into force january 1, 2018. Basel committee on banking supervision consultative.
General comments in esbgs opinion, the basel committee on banking supervision bcbs proposes a highly standardised approach so as to calculate the capital requirement for interest rate risk in the banking book, both under the pillar 1 approach and under. The iif, together with the ibfed, gfma and isda, submitted a response to the bcbs consultation on interest rate risk in the banking book. Basel committee on banking services bcbs financial. Toshio tsuiki cochairs, task force on interest rate risk in the banking book tfir basel committee on banking. Interest rate risk in the banking book irrbb is the risk to earnings or value and in turn to capital arising from movements of interest rates that affect a banks banking book positions. The basel committee on banking supervision has today issued standards for interest rate risk in the banking book irrbb.
In its consultative document, the bcbs proposes to reduce the risk weights for the general interest rate risk class by 2040 percent, and equity and fx risk classes. Tch comments on bcbs interest rate risk in the banking book consultative document september 11, 2015. The standards revise the committees 2004 principles for the management and supervision of interest rate risk, which set out supervisory expectations for banks identification, measurement, monitoring and control of irrbb as well as its supervision. Bcbs standards for irrbb proposed regulatory changes turn up the heat on irrbb management in april 2016, bcbs issued standards for interest rate risk in the banking book.
The revised standards, which were published for consultation in june 2015, are expected. Specifically, in response to bcbs 2657 a group of the major industry associations stated8 that the bcbs text on nonmodellable risk factors is prescriptive and very rigid to the extent that its strict interpretation and 3 bcbs consultative document. In april 2016, the basel committee on banking supervision issued its final standards for irrbb interest rate risk in the banking book. Interest rate risk in the banking book irrbb therefore reflects both the bank s fundamental business model and its assetliabilitymanagement alm strategy. Implementing bcbs 368 interest rate risk in the banking book in.
The final standard details twelve principles for the management, control, and supervision of irrbb, based on pillar 2 of basel iii. This is known as interest rate risk in the banking book or irbb. Ebf response to bcbs consultative document cd on interest. In june 2015, the bcbs published interest rate risk in the banking book. Book frtb1 implementation as well as its impact on banks market risk capital. Bcbs proposals for interest rate risk in the banking book irrbb. Ebf response to bcbs consultative document cd on interest rate risk in the banking book irrbb the european banking federation ebf is the voice of the european banking sector, uniting 32 national banking associations in europe that together represent some 4,500 banks large. Basel committee for banking supervision bcbs published a consultative document cd on the interest rate risk in the banking book irrbb.
The consultative document on the risk management, capital treatment and supervision of interest rate risk in the banking book irrbb expands upon and is intended to ultimately replace the basel committees 2004 principles for the management and supervision of interest rate risk. It should be read together with our past submissions to the task force on irrbb tfir, particularly the iifibfed paper dated june 26, 2014. A response to the basel committees consultative document on interest rate risk in the banking book by the british bankers association september 2015 introduction the bba is the leading association for uk banking and financial services representing members on the full range of uk and international banking issues. The existing pillar 3 disclosure requirements for these risk elements. The standards, issued for the first time in more than a decade, introduced a. Interest rate risk in the banking book irrbb is currently part of the basel capital. Basel committee on banking supervision consultative document. Basel committee consults on interest rate risk in the. Taking this into consideration we urge the bcbs to diminish spillover effects of their regulations imposed on banks onto other regulated entities into account. The basel committee on banking supervision bcbs finalised its.
See bcbs, international convergence of capital measurement and capital. Interest rate risk in the banking book, written by industry expert paul newson, provides a thorough guide to the new regulatory requirements surrounding irrbb and demonstrates the importance of good governance. A response to the basel committees consultative document on interest rate risk in the banking book by the british bankers association september 2015 introduction the bba is the leading association for uk banking and financial services representing members on. Tch comments on bcbs interest rate risk in the banking.
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