Banking book IRRBB templates

This is the first of a two-part article series following Interest Rate Risk in the Banking Book (IRRBB) changes.  On 31 January 2023, the EBA (European Banking Authority) launched a public consultation regarding the draft Implementing Technical Standards (ITS) on amending Commission Implementing Regulation (EU) 2021/451 regarding IRRBB reporting.

Background

Interest Rate Risk in the Banking Book (IRRBB), refers to the risk of potential financial losses arising from adverse movements in interest rates that affect a bank’s banking book. It specifically focuses on the potential impact of interest rate movements on the bank’s net interest income (NII) and economic value of equity (EVE). NII is the difference between the bank’s interest income minus its interest expenses, while EVE represents the market value of a bank’s equity.

To ensure the stability of the financial system, regulatory authorities have robust frameworks in place for banks to follow in order to assess and manage their interest rate risk. Regulatory authorities work consistently to amend these requirements to best serve the financial system and as a result, they have published a final report proposing amendments to the (ITS) about IRRBB reporting requirements.

Key takeaways

These changes are most significant for small and noncomplex institutions (SNCI) and ‘other’ institutions as it will allow them to report simplified templates. Application of these technical standards is expected to be in September 2024, and it is expected that the proposed changes will have a one-year implementation period.

To allow for more simplified reporting the ITS has introduced eleven templates for compilation which are specific to the simplified reporting suite to aid reduced reporting burden. They are;

The objective of this unified reporting is to ensure the necessary data quality for evaluating IRRBB risks across a spectrum of institutions. This includes large institutions, small and non-complex institutions (SNCIs), as well as other institutions besides large and SNCIs (referred to as 'other institutions'). It emphasises that all these entities should be subject to scrutiny for IRRBB risks and not excluded and they are strictly related to the improvement of policy work on the Supervisory outlier test (SOT), the RTS on the standardised methodologies and the Guidelines on IRRBB.

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