Implementing Interest Rate Risk in the Banking Book:

A Practical Approach

In April 2016, the Basel Committee on Banking Supervision (BCBS) published the final standard on capital framework for interest rate risk in the banking book (IRRBB). 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. The implementation date of IRRBB is January 1, 2018. This paper summarizes the core Pillar 2 approach of IRRBB, and the alternative Pillar 1 approach used by certain banks in a few situations. It also includes a practical approach to implementing IRRBB.