The discussions at the level of the Basel Committee and the Task Force on Interest Rate Risk (TFIR) on potential regulatory steps concerning the treatment of interest rate risk in the banking book (IRRBB) and the capital requirement for credit spread risks (CSRBB) in the banking book are likely to have a significant impact especially on cooperative banks. It is of key importance to design a coherent regulatory framework and to avoid overlaps with other regulatory provisions (e.g. the Liquidity Coverage Ratio, the Fundamental Review of the Trading Book).
Bank’s business models vary because their portfolio structures and depositors’ appetite and characteristics differ. As such, it is difficult to establish a globally uniform “standardized approach” for interest rate risk, since key elements in interest rate risk measurement greatly differ among countries. Against this backdrop, banks have been managing their interest rate risk under Pillar 2 since the introduction of Basel II, and accordingly established appropriate management frameworks while allocating necessary resources to such management.
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