Company: Moody's Analytics
Published: 05 April 2017
In April 2016, the Basel Committee on Banking Supervision published the final standard on capital framework for interest rate risk in the banking book (IRRBB). The final standard details twelve principles for the management, control, and supervision of IRRBB, based on Pillar 2 of Basel III.
There are a range of issues associated with calculating IRRBB, including data management, calculating the results and reporting results to regulators in the right format at the right time. IRRBB results must further be consistent with other regulatory capital results.
This white paper summarizes the core Pillar 2 approach of IRRBB, and the alternative Pillar 1 approach of IRRBB used by certain banks in a few situations. It also includes a practical approach to implementing IRRBB.