99. Supervisors could mandate their banks to follow the framework set out in this section, or a bank could choose to adopt it.

1. Overall structure of the standardised framework

100. The steps involved in measuring a bank’s IRRBB, based solely on EVE, are:

• Stage 1. Interest rate-sensitive banking book positions are allocated to one of three categories (ie amenable, less amenable and not amenable to standardisation).

• Stage 2. Determination of slotting of cash flows based on repricing maturities. This is a straightforward translation for positions amenable to standardisation. For positions less amenable to standardisation, they are excluded from this step. For positions with embedded automatic interest rate options, the optionality should be ignored for the purpose of slotting of notional repricing cash flows [That is, the embedded automatic interest rate option is stripped out from the process of slotting notional repricing cash flows in Stage 2 and treated together with other automatic interest rate options under Stage 4.].

For positions that are not amenable to standardisation, there is a separate treatment for:

(a) NMDs - according to separation of core and non-core cash flows via the approach set out in paragraphs 109 to 114.