Strategic Considerations for IRRBB Holistic Risk Management
The period of ultra-low and negative interest rate policies has ended abruptly and brought interest rate risk and related IRRBB regulation back to the forefront, as seen by the recent actions of the ECB and ensuing industry reactions. IRRBB regulation has considerably improved the management of interest rate risk that banks face in the current market environment.
The importance of interest rate risk management and related regulation is proven. As inflation soars and is being countered by interest rate hikes of major central banks, it has become even more so, leading to enhancements in the standards for monitoring interest rate risk in the banking book (IRRBB) issued by the Basel Committee. This paper takes you through IRRBB history, principles, and the current environment, ultimately making the case for a forward-looking adaptable risk management approach.
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