The management of interest rate risk in the banking book is one of the areas where institution specific solutions and approaches are most needed, given the generally idiosyncratic nature of the risk depending on the business model of institutions. In light of the importance for co-operative banks of retail and SME financing, the framework for IRRBB is a key policy area and the EACB welcomes the opportunity to comment on the EBA revisions to Interest Rate Risk in the Banking Book (IRRBB) and Credit Spread Risk in the Banking Book (CSRBB) framework.
We appreciate the EBA’s aim to ensure that the various elements of the revised framework (revised IRRBB and CSRBB GLs, RTS on Supervisory Outliers Test (SOTs), RTS on standardized and simplified standardized approach) can apply consistently in an aligned timeline. Considering the wide range of items covered in the GLs, we believe that for the overall alignment of application dates, a timeline of 12 months – after the publication in the Official Journal of the technical standards – is necessary. Indeed, we encourage EBA to ensure that the time between the publication of the final regulatory products and their application is sufficient to allow institutions to adjust where needed and we recommend keeping a proportionate approach throughout the framework.
We underline that the standardized approaches can only serve to determine a conservative risk metric where the assessment of specific institutions reveals criticalities, and not as a reference point in any way. It should be central to the definition of the new regulatory requirements for the standardized models that there is no incentive for institutions to rely on the fallback solution neglecting internal capacities and risk management skills. We also see that some aspects are not adequately taken into account in the draft RTS and major challenges in the implementation would be expected, especially for smaller and medium-sized banks.