White Paper

Interest Rate Risk In The Banking Book ā€“ How to manage IRRBB considering the Monetary Policy and the new regulation

Company: Chappuis Halder

Chappuis Halder case study

Category: Basel III

Published: 21 December 2015

Format:

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Overview

The past few years have seen central banks use unconventional tools to stimulate an economy that has kept on struggling since the 2008 crisis. In order to avoid deflation and other economic turmoil, the ECB launched a bond-buying program as an emergency stimulus to a weakened economy.

Such unconventional monetary policy has an impact on interest rates, and therefore, requires a closer monitoring of the Interest Rate Risk in the Banking Book (IRRBB).

This white paper focuses on understanding how current market conditions (low interest rates) can affect banks’ revenues and profitability. The paper further analyses, via simulations on a real portfolio, the impacts of interest rate moves on the Economic Value of Equity and the Earnings at Risk.

Categories related to Basel III