4.2.1 Perimeter of IRRBB

19. Institutions should consider all interest rate sensitive instruments in the banking book in the context of the assessment and management of exposures to IRRBB, including assets, liabilities, interest rate derivatives, non-interest rate derivatives referencing an interest rate and other off-balance sheet items (such as loan commitments).

20. Institutions should consider non-performing exposures [Non-performing exposures as defined in Annex V of Regulation (EU) 680/2014.] (net of provisions) as interest rate sensitive instruments reflecting expected cash flows and their timing.

21. Without prejudice to paragraph 10, small trading book business, as defined by paragraph 1 of Article 94 of Regulation (EU) No 575/2013, shall be included unless its interest rate risk is captured in another risk measure.

4.2.2 Capital identification, calculation and allocation for the purpose of IRRBB

22. When evaluating the amounts, types and distributions of internal capital pursuant to Article 73 of Directive 2013/36/EU, institutions should base the contribution of IRRBB to the overall internal capital assessment on the institution’s internal measurement systems outputs, taking account of key assumptions and risk limits. The overall level of capital should be commensurate with both the institution’s actual measured level of risk (including for IRRBB) and its risk appetite, and be duly documented in its report on the Internal Capital Adequacy Assessment Process (ICAAP report).