Response to consultation on draft RTS on IRRBB supervisory outlier tests
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not allow EBA to define behavioural assumptions, but EBA suggests imposing those caps in the
general guidelines for IRRBB management (par. 111) in CP 37.
It should be specified which time buckets that shall be used in the EVE SOT.
According to EBA Draft Delegated Regulation art. 5 institutions shall include commercial margins
and other spread components in NII SOT. It would be more consistent to leave discretion to include
or not. It is reminded that IRRBB (and CSRBB) relates to Market Risk in CRR. Hence, commercial
margins on loans and deposits do not relate in market risk. The regulation should not conflict with
other regulations.
It is envisaged to include in NII the changes in market value of instruments accounted for their fair
value. Unless limited transactions recognized to Fair Value Accounting through P&L which are
commonly included in Net Interest Income, this would overlap with EVE perspective and would be
at odds with hedging. Furthermore, EBA needs to be very clear regarding what PnL items should be
included, so that there is no room for different interpretation among jurisdictions.
The development of the NII SOT will required significant IT resources. Current EaR calculations do not
include linear floor and currency aggregation parameters. These changes can be facilitated in an
orderly timeframe, but it will be more challenging to align the constant balance sheet reinvestment
criteria to current commercial margins. It therefore seems appropriate to grant sufficient time
before the new conditions will enter into force, i.e. postpone implementation to the semester
following the publication in the OJE.
“In the NII SOT, the EBA will decide on the consideration of market value changes of fair value
instruments in the assessment of the impact. The EBA seeks for a good balance between a
comprehensive scope of all elements affected by interest rate changes in the short and medium
term and a good harmonisation for comparability across banks. Differences between the various
accounting frameworks need to be considered. This was one reason to not consider fees and
commissions per se.”
It seems appropriate to introduce additional details and specification on how a specific bank
would be identified as an outlier based on the dEVE and dNII large decline definitions:
Rather than one hard threshold (respectively for dNII and dEVE) whose breach would imply
the outlier definition, it might seem appropriate to introduce progressive thresholds,
Breach of simply the dNII or the dEVE threshold should not automatically imply an outlier
definition but the 2 measures should be considered together to provide a full IRRBB picture,
Materiality of the breach should also be further specified as a marginal breach might seem
to be treated with the same severity of a significant one.
Respondents are also kindly requested to express whether they find an inclusion of market value changes in the calculation of the NII SOT clear enough.
There is no mentioned cap on Non-Maturing Deposits in CP 36, as CRD art 98 5a (b) and (c) doesnot allow EBA to define behavioural assumptions, but EBA suggests imposing those caps in the
general guidelines for IRRBB management (par. 111) in CP 37.
It should be specified which time buckets that shall be used in the EVE SOT.
According to EBA Draft Delegated Regulation art. 5 institutions shall include commercial margins
and other spread components in NII SOT. It would be more consistent to leave discretion to include
or not. It is reminded that IRRBB (and CSRBB) relates to Market Risk in CRR. Hence, commercial
margins on loans and deposits do not relate in market risk. The regulation should not conflict with
other regulations.
It is envisaged to include in NII the changes in market value of instruments accounted for their fair
value. Unless limited transactions recognized to Fair Value Accounting through P&L which are
commonly included in Net Interest Income, this would overlap with EVE perspective and would be
at odds with hedging. Furthermore, EBA needs to be very clear regarding what PnL items should be
included, so that there is no room for different interpretation among jurisdictions.
The development of the NII SOT will required significant IT resources. Current EaR calculations do not
include linear floor and currency aggregation parameters. These changes can be facilitated in an
orderly timeframe, but it will be more challenging to align the constant balance sheet reinvestment
criteria to current commercial margins. It therefore seems appropriate to grant sufficient time
before the new conditions will enter into force, i.e. postpone implementation to the semester
following the publication in the OJE.
Question 2: Do respondents have any comment related to these two metrics for the specification and the calibration of the test statistic for the large decline in Article 6 for the purpose of NII SOT? Specifically, do respondents find the inclusion of administrative expenses in metric 2 clear enough? Do respondents have any comment on the example on currency aggregation for metric 1 and metric 2?
The following passage on page 19 would need clarification.:“In the NII SOT, the EBA will decide on the consideration of market value changes of fair value
instruments in the assessment of the impact. The EBA seeks for a good balance between a
comprehensive scope of all elements affected by interest rate changes in the short and medium
term and a good harmonisation for comparability across banks. Differences between the various
accounting frameworks need to be considered. This was one reason to not consider fees and
commissions per se.”
It seems appropriate to introduce additional details and specification on how a specific bank
would be identified as an outlier based on the dEVE and dNII large decline definitions:
Rather than one hard threshold (respectively for dNII and dEVE) whose breach would imply
the outlier definition, it might seem appropriate to introduce progressive thresholds,
Breach of simply the dNII or the dEVE threshold should not automatically imply an outlier
definition but the 2 measures should be considered together to provide a full IRRBB picture,
Materiality of the breach should also be further specified as a marginal breach might seem
to be treated with the same severity of a significant one.
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