The standardised interest rate shock scenarios

 Banks should apply six prescribed interest rate shock scenarios to capture parallel and non-parallel gap risks for EVE and two prescribed interest rate shock scenarios for NII. These scenarios are applied to IRRBB exposures in each currency for which the bank has material positions. In order to accommodate heterogeneous economic environments across jurisdictions, the six shock scenarios reflect currency-specific absolute shocks as specified in Table 1 below. For the purposes of capturing the local rate environment, a historical time series ranging from 2000 to 2015 for various maturities [Jurisdictions may under national discretion, deviate from the initial 16-year period if it better reflects their idiosyncratic circumstances.] was used to derive each scenario for a given currency.

Under this approach, IRRBB is measured by means of the following six scenarios:

(i) parallel shock up;

(ii) parallel shock down;

(iii) steepener shock (short rates down and long rates up);

(iv) flattener shock (short rates up and long rates down);

(v) short rates shock up; and

(vi) short rates shock down

The final calibration of the interest rate shock size determined by the Basel Committee at the time of publication is as follows:

Table 1. Specified size of interest rate shocks