44. Institutions should implement limits that target maintaining IRRBB exposures consistent with …

Institutions should implement limits that target maintaining IRRBB exposures consistent with their risk appetite and with their overall approach for measuring IRRBB, in particular the following:

• (a) Aggregate risk limits that clearly articulate the amount of IRRBB acceptable to the management body should be applied on a consolidated basis and, as appropriate, at the level of individual affiliates.
• (b) Limits may be associated with specific scenarios of changes in interest rates and term structures, such as their increase or decrease or a change in shape of the yield curve. The interest rate movements used in developing these limits should represent sufficiently adverse shock and stress situations, taking into account historical interest rate volatility and the time required by management to mitigate those risk exposures.
• (c) Policy limits should be appropriate to the nature, size, complexity and capital adequacy of the institution, as well as its ability to measure and manage its risks.
• (d) Depending on the nature of an institution's activities and business model, sub-limits may also be identified for individual business units, portfolios, instrument types, specific instruments or material sub-types of IRRBB risk such as gap risk, basis risk and option risk.
• (e) Systems should be in place to ensure that positions that exceed, or are likely to exceed, limits defined by the management body or its delegates receive prompt management attention and are escalated without delay. There should be a clear policy on who will be informed, how the communication will take place and the actions which will be taken in response.
• (f) The reporting of risk measures to the management body or its delegates should have at least a quarterly frequency and should compare current exposure with policy limits.

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

• EBA - Published by the European Banking Authority at https://www.eba.europa.eu/