Yes, I agree. You show net position in your books and you have to refinance this position, this is the interest rate sensitive part. Nevertheless in case of small instutions modelling these positions is not effective on cost-benefit basis. EBA should ensure choice for small banks and elaborate standard figures for these positions (e.g. based on type of the exposure, credit rating, etc.)
In paragraph 26 the guideline requires instutions factor the impact of shock and stress scenarios on positions priced with different interest rate indices (basis risk). How can we measure this impact? EBA should elaborate a standard calculation method for this purpose.
I do not agree internal capital allocation in respect of IRRBB to earnings at all. We allocate extra capital to our overall stress-test reasult which take into account P&L effects as well. In that case we would take the potential risk into consideration in a duplicated way.
In a normal business model the effect of commercial margins to overall IRRBB position is insignificant, so prescribing adequate methodology on internal treatment of commercial margins causes extra burden for small instutions without real gain.
In a normal business model the effect of commercial margins to overall IRRBB position is insignificant, so including commercial margins in earning measures causes extra burden for small instutions without real gain.
It is clear.
15% of the instution's Tier 1 capital is the real bottleneck, why does EBA keep 20% of the institution's own funds as limit as well? What is the difference between the two obligations: the instution should inform the competent authority immeadiately" or "the instution should inform the competent authority"?"
Excluding commercial margins. In a normal business model the effect of commercial margins to overall IRRBB position is insignificant. Nevertheless higher commercial margins means higher risk in cashflows (loss, timing).
The banking core systems are not so flexible, so it would cause extra cost for instutions.
It is OK.
It could be material and this rule punish those instutions who has 'positive' risk.