BCBS 368 was published by the Basel Committee on April 21, 2016, a new standard for monitoring and controlling interest rate risk in the banking book (IRRBB). The standard replaces the previous BCBS 108, which had been in force since 2004 and did not contain regulations for interest rate risks in the banking book. As part of these new regulations, the European Banking Authority (EBA) published a consultation paper on the revision of its guidelines adopted in 2015 for the measurement and controlling of the interest rate risk in the banking book.
After a long, ongoing phase of low interest rates, institutions with a high degree of maturity transformation are particularly exposed to the risk of rising interest rates. Therefore, BCBS 368 should strengthen the interest rate risk in the banking book as a major type of risk (future Pillar II of the Basel pillar model) in the context of the regulatory audit and monitoring process.
BCBS 368 differentiates between two metrics for the measurement and controlling of interest rate risks:
In addition to a definition of the interest rate risk, the standard contains, among others, principles for financial institutions to measure, control and monitor interest rate risks and principles for the supervisory authority to monitor the institution as part of the controlling and risk-bearing capacity of the interest rate risks.
In terms of interest rate risks, the standard differentiates between the following forms:
WTS Advisory will support you and your company in the analysis of your current system for measuring and controlling the interest rate risk in the banking book, in the identification of gaps as a result of the new regulatory requirements, the design of suitable adjustment measures and implementation support.
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