Background

1. Interest rate risk arising from non-trading book activities (IRRBB) is an important financial risk for credit institutions, which is considered under Pillar 2. The supervisory framework assumes that banks develop their own methodologies and processes for identification, measurement, monitoring and control of this risk. These methodologies and internal processes, including the assumptions used, are subject to the supervisory review and evaluation process carried out by supervisory authorities.

2. In order to set out supervisory expectations regarding the management of IRRBB, the EBA published Guidelines on the management of IRRBB in May 2015. These guidelines took into account existing supervisory expectations and practices including the Principles for the management and supervision of interest rate risk published by the Basel Committee on Banking Supervision (BCBS) in 2004.

3. In April 2016, the BCBS published an updated version of its standards on the management of IRRBB (BCBS Standards) to reflect changes in markets and supervisory practices experienced since 2004. The BCBS Standards have confirmed the Pillar 2 approach to IRRBB and introduced some new elements in the management of IRRBB. The BCBS Standards are expected to be implemented by 2018.