EBA updates guidelines on interest rate risk arising from non-trading activities

22 May 2015

The European Banking Authority (EBA) published today an updated version of the CEBS guidelines on technical aspects of the management of interest rate risk arising from non-trading activities under the supervisory review process, published on 3 October 2006. The guidance provided in these updated guidelines applies to the interest rate risk arising from non-trading activities (IRRBB), one of the Pillar 2 risks specified in the Capital Requirements Directive (CRDIV). 
 
The Guidelines focus on expectations towards institutions regarding the appropriate identification and mitigation of IRRBB risks. It should be noted that all interest rate risk arising from trading activities is outside the scope of these updated IRRBB guidelines. The document introduces changes to the high-level ‘Principles' laid down in the CEBS Guidelines in order to clarify expectations towards institutions, extend the scope to internal governance, and specify the calculation of the supervisory ‘standard shock' that should be performed in accordance with Article 98(5) of CRDIV. They also provide more detailed guidance on certain aspects of managing IRRBB.
 
The Guidelines are structured into two major sections. The first section is an updated version of the original CEBS text and provides enhanced high-level guidance on the management of IRRBB. The second section provides additional details for the management of IRRBB, namely some key technical aspects that should be considered, and specifies the high level guidance. It also clarifies how institutions should take these aspects into account when assessing IRRBB in their Internal Capital Adequacy Assessment Process (ICAAP). This detailed guidance focuses thematically on five areas of interest risk assessment and control: scenarios and stress testing, measurement assumptions, methods for measuring interest rate risk, governance and identification of interest rate risk, and calculation and allocation of capital to interest rate risk.

Legal basis and next steps

These Guidelines are addressed to Competent Authorities and will apply from 1 January 2016. The CEBS guidelines on technical aspects of the management of interest rate risk arising from non-trading activities under the supervisory review process, dated 3 October 2006, are repealed with effect from 1 January 2016.
 
Following the publication of the English version, the EBA will make available, in due course, the translations of the Guidelines in all EU languages. Within two months from the publication of the translated Guidelines, Competent Authorities shall confirm to the EBA their compliance status, which will be disclosed on the EBA website.
 

Press contacts:

Franca Rosa Congiu

E-mail: press@eba.europa.eu - Tel: +44 (0) 207 382 1772