Internal reporting

Institutions’ internal risk -reporting systems should provide timely, accurate and comprehensive information about their exposures to IRRBB. The frequency of internal reports should be at least quarterly.

The internal reports should be provided to the management body or its delegates with information at relevant levels of aggregation (by consolidation level and currency), and reviewed regularly. The reports should contain a level of information adapted to the particular management level (e.g., management body, senior management) and to the specific situation of the institution and the economic environment.

The IRRBB reports should provide aggregate information as well as sufficient supporting detail to enable the management body or its delegates to assess the sensitivity of the institution to changes in market conditions and other important risk factors. The content of the reports should reflect changes in the risk profile of the institution and in the economic environment, and compare current exposure with policy limits.

The IRRBB reports should, on a regular basis, include the results of the model reviews and audits as well as comparisons of past forecasts or risk estimates with actual results to inform potential modelling shortcomings. In particular, institutions should assess the modelled prepayment losses against historical realised losses. Portfolios that may be subject to significant mark-to-market movements should be clearly identified and the impact should be monitored within the institution’s MIS and subject to oversight in line with any other portfolios exposed to market risk.

While the types of reports prepared for the management body or its delegates will vary based on the institution’s portfolio composition, they should inclu de, taking into account paragraphs 65 and 66, the following:

• (a) Summaries of the institution’s aggregate IRRBB exposures, including information on exposures to gap, basis and option risk. Assets, liabilities, cash flows, and strategies that are driving the level and direction of IRRBB should be identified and explained.
• (b) Reports demonstrating the institution’s compliance with policies and limits.
• (c) Key modelling assumptions and parameters, such as characteristics of non-maturity deposits (NMDs), prepayments on fixed rate loans, early withdrawals of fixed term deposits, drawing of commitments, currency aggregation and treatment of commercial margins.
• (d) Details of the impact of key modelling assumptions made on the IRRBB measures including changes in assumptions under various interest rate scenarios.
• (e) Details of the impact of interest rate derivatives on the IRRBB measures.
• (f) Details of the impact of fair value instruments, including Level 3 assets and liabilities, on the IRRBB measures.
• (g) Results of stress tests as referred to in section 4.3.4, the shocks as referred to in section 4.3.3, the supervisory outlier tests as referred to in paragraph 5 of Article 98 of Directive 2013/36/EU, and assessments of sensitivity to key assumptions and parameters; and
• (h) Summaries of the reviews of IRRBB policies, procedures and adequacy of the measurement systems, including any findings of internal and external auditors or other equivalent external parties (such as consultants).

Based on these reports, the management body or its delegates should be able to assess the sensitivity of the institution to changes in market conditions and other important risk factors, with particular reference to portfolios that may potentially be subject to significant mark-to-market movements.

The internal measurement system should generate reports in a format that allows the different levels of the institution’s management to understand the reports easily and to make appropriate decisions in a timely manner. The reports should constitute the basis for regular monitoring of whether or not the institution operates in line with its strategy and the interest rate risk limits it has adopted.