- Basel Committee publishes consultation on targeted adjustment to its standard on interest rate risk in the banking book.
- Adjustments update calibration of the standard’s interest rate shock parameters and methodology used to calculate the shocks.
- Comments on the proposed adjustments requested by 28 March 2024.
The Basel Committee on Banking Supervision (BCBS) published a consultative document to propose targeted adjustments to its 2016 standard on interest rate risk in the banking book (IRRBB). The adjustments aim to give effect to a commitment to periodically update the calibration of the interest rate shock factors used in the standard. The changes are unrelated to the Committee’s ongoing analytical work on interest rate risk following the March 2023 banking turmoil.
The IRRBB standard requires banks to calculate measures of interest rate risk for their banking book exposures. These measures are based on a specified set of interest rate shocks for each currency for which the bank has material positions.
The Committee noted in the IRRBB standard that it will periodically review the specified shock sizes and a review was initiated as part of the Committee’s 2023–24 work program. As a result of the review, the Committee proposes to make a set of adjustments to the calibration of the specified interest rate shocks in the IRRBB standard.
It also proposes to make targeted adjustments to the current methodology used to calculate the shocks. The changes to the methodology are needed to address problems with how the current methodology captures interest rate changes during periods when interest rates are close to zero.