June 12, 2018

The BaFin issued a new circular (Circular 9/18) on the interest rate risk in the banking book (IRRBB). It is aimed at German institutions and contains revised guidelines for calculating the effects of a sudden and unexpected interest rate change (Basel default shock). The corresponding circular from 2011 will be repealed (Circular 11/2011).

This new version reflects the developments of the recent years at the national and international levels. BaFin transposes the guidelines of EBA on interest rate risks in the banking book into national law. In addition, BaFin sees the need to adapt the treatment of negative interest rates when calculating interest rate risks as a result of market interest rates. The circular also specifies the information that institutions must report to BaFin and Deutsche Bundesbank at the end of the quarter. Deutsche Bundesbank has provided a corresponding reporting form and communicated the details of the technical transfers.

 

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Keywords: Europe, Germany, Banking, IRRBB, Reporting, Basel III, Basel Default Shock, BaFin