On 12 December 2023, the Basel Committee on Banking Supervision (Basel Committee) published a consultation on targeted adjustment to its standard on interest rate risk in the banking book (IRRBB).
The IRRBB standard requires banks to calculate measures of interest rate risk for their banking book exposures. These measures are based on a specified set of interest rate shocks for each currency for which the bank has material positions. The proposed adjustments are intended to give effect to a commitment to periodically update the calibration of the interest rate shock factors used in the standard.
The deadline for comments on the proposed amendments is 28 March 2024.
The review of the calibration of the IRRBB shocks began before the March 2023 banking turmoil. A Basel Committee report on the banking turmoil notes that there were fundamental shortcomings in basic risk management of traditional banking risks, including interest rate risk. It notes that the Basel Committee is pursuing a series of follow-up initiatives, including analytical work to assess whether specific features of the Basel Framework performed as intended during the turmoil and is assessing the need to explore policy options over the medium-term. Any policy proposals arising from this work would be subject to a separate consultation.