EBA proposed the implementing technical standards on Pillar 3 disclosures for exposures to interest rate risk on positions not held in the trading book (IRRBB), in line with the Capital Requirements Regulation or CRR. The proposed implementing standards stipulate comparable disclosures that would allow stakeholders to assess the IRRBB risk management framework of institutions as well as the sensitivity of the economic value of equity and net interest income to changes in interest rates. The consultation period ends on August 30, 2021 and EBA plans to submit the final implementing standards to EC in October 2021.
From June 28, 2021, the CRR Article 448 requires institutions to disclose quantitative and qualitative information on the risks arising from the potential changes in interest rates that affect both the economic value of equity and the net interest income of their non‐trading book activities referred to in the Capital Requirements Directive or CRD IV. Thus, EBA has proposed these implementing standards that would amend the comprehensive implementing technical standards on public disclosures of institutions (Regulation 637/2021), in line with the strategic objective of developing a single and comprehensive Pillar 3 package. The proposed implementing standards cover quantitative information in the form of Template IRRBB1 and qualitative disclosures in the form of Table IRRBBA. Template IRRBB1 provides quantitative information on the impact of interest rate supervisory shock scenarios on changes in economic value of equity and net interest income, calculated on the basis of a set of common modeling and parametric assumptions as referred to in Article 98(5a)(b) and (c) of CRD IV. Table IRRBBA enables the monitoring of the sensitivity of the economic value of equity and net interest income to changes in interest rates, to understand the key assumptions used in calculation of the IRRBB exposure values and the overall IRRBB objective and management.
This proposal is in line with the existing regulatory framework, specifically the Basel disclosure requirements and the EBA guidelines on the management of interest rate risk arising from non‐trading book activities. The proposed implementing technical standards have been developed with the intention to minimize any potential future change that might be needed following the finalization of the regulatory work. Given the application of the disclosure requirements of Article 448 of CRR from June 2021, this consultation paper also provides clarity on what institutions should disclose during the time that the regulatory technical standards provided by Article 84 and Article 98(5a) of CRD IV are not applicable.
- Press Release
- Consultation Paper (PDF)
- IRRBB Disclosure Templates (XLSX)
- Instructions for IRRBB Templates (PDF)
Comment Due Date: August 30, 2021
Keywords: Europe, EU, Banking, IRRBB, Pillar 3, Disclosures, CRR, Basel, Implementing Technical Standards, CRD IV, Interest Rate Risk, EBA
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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