On 16 July 2024, the Basel Committee on Banking Supervision (Basel Committee) announced that it had made targeted adjustments to the specified interest rate shocks in the interest rate risk in the banking book (IRRBB) standard.
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 adjustments, which were consulted on in December 2023, are intended to give effect to a commitment to periodically update the calibration of the interest rate shock factors used in the standard.
The updates include:
- Expansion of the time series used in the calibration from December 2015 to December 2023.
- Replacement of the global shock factors with local shock factors calculated directly for each currency using the averages of absolute changes in interest rates calculated over a rolling six-month period.
- Move from a 99th percentile value in determining the shock factor to a 99.9th percentile value, to maintain sufficient conservatism in the proposed recalibration.
- Reducing the rounding of the interest rate shocks from a multiple of 50 basis points to a multiple of 25 basis points.
Next steps
The revised standard should be implemented by 1 January 2026. The revised text will be incorporated into the consolidated Basel Framework.
This means that banks whose financial year ends on 31 December would have to provide the relevant disclosure in 2026, based on information as of 31 December 2025.