BaFin is revising and consulting on Circular 11/2011 for interest rate risk in the banking book (IRRBB). The consultation closes on November 17, 2017.
The three important changes being introduced in the Circular 11/2011 are the inclusion of cash flows without margins, deletion of the avoidance procedure, and modifications and clarifications with respect to the alternative shock level. The new circular does not, however, anticipate any future rules and is limited to the calculation of the standard shock (± 200 basis points).
With the draft of the new circular, the German supervisory authority aims to implement the EBA “Guidelines for the control of the interest rate risk in transactions in the investment business, ” which were published in 2015. BaFin aims to implement these guidelines in a way that keeps the organizational and financial costs of the credit management within a reasonable framework. The revisions are therefore intended to prevent the creation of new targets, following the implementation of the new Basel rules, the current revision of the EBA guidelines, and the anticipated innovations in the CRD V and CRR II, respectively. BCBS had published the new IRRBB rules in June 2016 and these apply from January 01, 2018.
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Comment Due Date: November 17, 2017
Keywords: Europe, Germany, Banking, IRRBB, CRD, Circular 11/2011, BaFin
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