+26. Capital adequacy assessments for IRRBB should take into account the following: (a) the size and …

26. Capital adequacy assessments for IRRBB should take into account the following: (a) the size and …

Capital adequacy assessments for IRRBB should take into account the following:

  • (a) the size and tenor of internal limits on IRRBB exposures, and whether or not these limits are reached at the point of capital calculation;
  • (b) the expected cost of hedging open positions that are intended to take advantage of internal expectations of the future level of interest rates;
  • (c) the sensitivity of the internal measures of IRRBB to key or imperfect modelling assumptions;
  • (d) the impact of shock and stress scenarios on positions priced with different interest rate indices (basis risk);
  • (e) the impact on economic value and earnings (including effects on the fair value through other comprehensive income (FVOCI) portfolio) of mismatched positions in different currencies;
  • (f) the impact of embedded losses and embedded gains;
  • (g) the distribution of capital relative to risks across legal entities included in the group’s prudential perimeter of consolidation, in addition to the adequacy of overall capital on a consolidated basis;
  • (h) the drivers of the underlying risk; and
  • (i) the circumstances under which the risk may materialise.

1. Overview

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1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

Requirements

3. Related Standards

Standards
  • EBA -

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