Continuous focus on interest rate risk: EBA finalizes IRRBB Guideline

On 19 July 2018, the European Banking Authority (EBA) published the new Guideline on the Management of Interest Rate Risks in the Banking Book (IRRBB). In mid-2019, the new guidelines will replace the previous EBA IRRBB Guideline published in 2015. Starting on 30 June 2019, the new Guideline will apply to all financial institutions and regulators in the European Union. By means of the new guideline, the EBA implements the Basel paper BCBS 368 requirements regarding banks’internal IRRBB management and the regulatory outlier test in Europe. In the context of the regulatory roadmap, the paper – in conjunction with the EBA guidelines on SREP and stress testing – strengthens the Pillar 2 approach. Hereby, we observe a further alignment of these guidelines. For instance, the consideration of the normative perspective of the ICAAP as well as of an integrated strategic planning process shows the alignment with the SREP and stress test guidelines. Overall, the guidelines provide a consistent view on the requirements regarding monitoring and managing IRRBB. This is also reflected in the audit instructions of competent authorities.