+4. Guidelines on the management of interest rate risk arising from non-trading book activities
---+4.1 General provisions
------+11. Institutions should treat IRRBB as an important risk and always assess it explicitly and …
------+12. Institutions should identify their IRRBB exposures and ensure that IRRBB is adequately …
------+13. Institutions should manage and mitigate risks arising from their IRRBB exposures that affect …
------+14. When calculating the impact of interest rate movements in the earnings perspective …
------+15. The change in earnings should be the difference between expected earnings under a base scenario …
------+16. Institutions should consider non-performing exposures (net of provisions) as interest rate …
------+17. Institutions should consider interest rate derivatives, as well as off-balance-sheet items such …
------+18. Institutions should monitor and assess their CSRBB-affected exposures, by reference to the …
------+19. When implementing the guidelines, institutions should identify their existing and prospective …
------+20. Based upon the assessment of their existing and prospective exposure to IRRBB, institutions …
------+21. In addition to the existing and prospective exposure to IRRBB, when implementing the …
---+4.2 Capital identification, calculation and allocation
------+22. When evaluating the amounts, types and distributions of internal capital pursuant to Article 73 …
------+23. Institutions should demonstrate that their internal capital is commensurate with the level of …
------+24. In their ICAAP analysis of the amount of internal capital required for IRRBB, institutions …
------+25. Institutions should not only rely on the supervisory assessments of capital adequacy for IRRBB …
------+26. Capital adequacy assessments for IRRBB should take into account the following: (a) the size and …
------+27. The outcomes of the capital adequacy for IRRBB should be considered in an institution’s ICAAP …
------+28. To calibrate the amount of internal capital to be held for IRRBB, institutions should use …
------+29. Institutions that operate economic capital models should ensure that the internal capital …
------+30. In considering whether or not an allocation of internal capital should be made in respect of …
------+31. Institutions should consider internal capital buffer adjustments where the results of their …
---+4.3 Governance
------+32. The IRRBB strategy of the institution, including the risk appetite for IRRBB and IRRBB …
------+33. The institution’s risk appetite for IRRBB should be expressed in terms of the acceptable impact …
------+34. The overall IRRBB strategy should also include the decision about the extent to which the …
------+35. Institutions should duly assess proposals to use new products, or engage in new activities …
------+36. Institutions using derivative instruments to mitigate IRRBB exposures should possess the …
------+37. Institutions using models of customer behaviour as input for the measurement of their IRRBB …
------+38. When making decisions on hedging activities, institutions should be aware of the effects of …
------+39. Consolidating institutions should ensure that internal governance arrangements and processes …
------+40. In view of having internal governance arrangements pursuant to Article 74 and 88 of Directive …
------+41. The management body should, in particular, be responsible for the following: (a) Understanding …
------+42. Institutions should have delegation arrangements and procedures in place for any delegation by …
------+43. Institutions should articulate their risk appetite for IRRBB in terms of the risk to both …
------+44. Institutions should implement limits that target maintaining IRRBB exposures consistent with …
------+45. A framework should be in place to monitor the evolution of hedging strategies that rely on …
------+46. The management body should, based on its overall IRRBB strategy, adopt robust risk policies …
------+47. The policies should be well reasoned, robust and documented and should address all IRRBB …
------+48. All IRRBB policies should be reviewed regularly, at least annually, and revised as needed.
------+49. To ensure that the institution’s IRRBB management policies and procedures remain appropriate …
------+50. The management body or its delegates should ensure that analysis and risk management activities …
------+51. With regard to IRRBB control policies and procedures, institutions should have appropriate …
------+52. Institutions should undertake regular reviews and evaluations of their internal control systems …
------+53. Institutions should have their IRRBB identification, measurement, monitoring and control …
------+54. The IT systems and applications used by the institution to carry out, process and record …
------+55. The IT system and transaction system should be capable of recording the repricing profile …
------+56. The systems used to measure IRRBB should be capable of capturing the IRRBB characteristics of …
------+57. For complex, structured products in particular, the transaction system should be able to gather …
------+58. Adequate organisational controls of IT systems should be in place to prevent the corruption of …
------+59. Risk measures should be based on reliable market and internal data. Institutions should …
------+60. To ensure the high quality of data, institutions should implement appropriate processes that …
------+61. Where institutions slot cash flows into different time buckets (e.g. for gap analyses) or …
------+62. Institutions should identify potential reasons for discrepancies and irregularities that may …
------+63. Institutions should set up appropriate processes to ensure that the data used to feed models …
------+64. Institutions’ internal risk-reporting systems should provide timely, accurate and comprehensive …
------+65. The internal reports should be provided to the management body or its delegates with …
------+66. The IRRBB reports should provide aggregate information as well as sufficient supporting detail …
------+67. The IRRBB reports should, on a regular basis, include the results of the model reviews and …
------+68. While the types of reports prepared for the management body or its delegates will vary based on …
------+69. Based on these reports, the management body or its delegates should be able to assess the …
------+70. The internal measurement system should generate reports in a format that allows the different …
------+71. Institutions should ensure that the validation of IRRBB measurement methods — which should be …
------+72. The validation framework should include the following four core elements: (a) evaluation of …
------+73. In addressing the expected initial and ongoing validation activities, the policy should …
------+74. Model risk management for IRRBB measures should follow a holistic approach that begins with …
------+75. The review and validation results and any recommendations on model usage should be presented to …
------+76. The ongoing review process should establish a set of exception trigger events that obligate the …
------+77. On the basis of observations and new information gained over time, an approved model may be …
------+78. Institutions may rely on third-party IRRBB models to manage and control IRRBB, provided that …
------+79. Model inputs or assumptions, whether stemming from internal model processes or from third …
---+4.4 Measurement
------+80. Institutions should implement robust internal measurement systems (IMSs) that capture all …
------+81. Institutions should measure their exposure to IRRBB in terms of potential changes to both the …
------+82. If commercial margins and other spread components are excluded from economic value measures …
------+83. When calculating earnings measures, institutions should include commercial margins.
------+84. Institutions should consider non-performing exposures (net of provisions) as interest rate …
------+85. When measuring their exposure to IRRBB, institutions should not purely rely on the calculation …
------+86. Institutions should not rely on a single measure of risk but should instead use the range of …
------+87. The limitations of each quantitative tool and model used should be fully understood by the …
------+88. Institutions should identify and measure all components of IRRBB. In order to identify …
------+Table 1: Identification of sub-components of interest rate risk in the non-trading book
------+Component Method Focus
---------+89. For measuring and monitoring of IRRBB, institutions should use at least one earnings-based …
---------+90. Institutions should regularly, at least quarterly and more frequently in times of increased …
---------+91. Institutions should also consider whether to apply a conditional or unconditional cash flow …
---------+92. Institutions should assess exposures in each currency in which they have positions. For the …
---------+93. When selecting interest rate shock scenarios, institutions should consider the following: (a) …
---------+94. In low interest rate environments, institutions should also consider negative interest rate …
---------+95. The results of shock scenarios should feed into the decision-making at appropriate management …
---------+96. IRRBB stress testing should be considered in the ICAAP, where institutions should undertake …
---------+97. IRRBB stress testing should be performed regularly, at least annually and more frequently in …
---------+98. The IRRBB stress-testing framework should include clearly defined objectives, scenarios …
---------+99. In enterprise-wide stress tests, the interaction of IRRBB with other risk categories (e.g. …
---------+100. Institutions should perform reverse stress tests in order to (i) identify interest rate …
---------+101. In testing vulnerabilities under stressed conditions, institutions should use larger and more …
---------+102. The results of stress scenarios should feed into the decision-making at the appropriate …
---------+103. When measuring IRRBB, institutions should fully understand and document key behavioural and …
---------+104. Institutions should, in relation to both economic value and earnings-based measures of IRRBB …
---------+105. As market conditions, competitive environments and strategies change over time, institutions …
------+a) Behavioural assumptions for customer accounts with embedded customer optionality
---------+106. In assessing the implications of optionality, institutions should take into account: (a) The …
---------+107. Institutions should have policies in place governing the setting of, and the regular …
------+b) Behavioural assumptions for customer accounts without specific repricing dates
---------+108. In making behavioural assumptions about accounts without specific repricing dates for the …
------+c) Corporate planning assumptions for own equity capital
---------+109. Where institutions decide to adopt a policy intended to stabilise earnings arising from their …
---------+110. In deciding the investment term assumptions for equity capital, institutions should avoid …
---------+111. The investment term assumptions used to manage the risks to earnings and economic value …
---------+112. Where an institution has not set explicit assumptions for the investment term of equity …
---+4.5 Supervisory outlier test
------+113. Institutions should regularly, at least quarterly, calculate the impact on their EVE of a …
------+114. Institutions should regularly, at least quarterly, calculate the impact on their EVE of …
------+115. When calculating the change in EVE for the purpose of paragraphs 113 and 114, institutions …
------+116. When computing the effects of the standard EVE outlier test, institutions should use the …

4. Guidelines on the management of interest rate risk arising from non-trading book activities

4. Guidelines on the management of interest rate risk arising from non-trading book activities

1. Forbhreathnú

,
4.1 General provisions

4.1 General provisions
4.2 Capital identification, calculation and allocation

4.2 Capital identification, calculation and allocation
4.3 Governance

4.3.1 Overall IRRBB strategy
4.4 Measurement

4.4.1 General approach to measurement of IRRBB
4.5 Supervisory outlier test

4.5 Supervisory outlier test

1.1 Tagairtí

1.2 Ceanglais aitheanta

1.3 Caighdeáin ghaolmhara

2. Ceanglais aitheanta

Ceanglais

3. Caighdeáin ghaolmhara

Caighdeáin
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