Compliance with the Basel Committee’s standards on interest-rate risk in the banking book (BCBS 368) presents significant challenges to all banks with respect to measurement, calculation and hedging of interest rate risk, and this whole area is the subject of intense focus from the regulatory authorities. Banks need to ensure they are able to address all the requirements of the regulatory whilst ensuring regulatory capital optimisation.
This one-day workshop provides comprehensive coverage of business best-practice approach to IRRBB, to ensure optimum compliance with Basel Standards. It explains the process and implementation of an efficient IRRBB measurement, reporting and hedging framework in clear and practical terms, to enable delegates to acquire an understanding of best-practice IRRBB principles, and how they can be integrated into ALM policies, thus optimising the bank’s risk management framework.
A well-designed IRRBB framework enables a bank to pursue its strategic objectives, conversely a poorly implemented IRRBB framework can lead to long-term damage to a bank’s balance sheet structure and risk management position.
The workshop provides delegates with an in-depth understanding of the intricacies of IRRBB management, focusing on the different metrics involved and examining best practice approaches to modelling interest rate risk. Key topic areas including approaches to measurement and reporting, stress testing and disclosure requirement are covered in practical detail.
By the end of this workshop you will be able to:
- Understand the value and importance of an effective IRRBB mechanism
- Be able to ensure best-practice measurement, reporting and hedging for your bank’s IRRBB process framework
- Understand the use, calculation and application of the two reporting measures (NII and EVE)
- Implement a best-practice IRRBB regime in your bank
- Operate your bank’s IRRBB process efficiently and effectively
Who should attend?
The workshop is aimed at experienced or middle-ranking Treasury, Risk, Finance and Business Line practitioners, and covers the complete spectrum of IRRBB from regulatory compliance, measurement, and behavioural modelling to stress testing and hedging. Delegates take part in Group Exercises that aim to demonstrate the IRRBB framework in a practical, observable context.
Treasury Senior Management, Heads of ALM/ Money Markets, Risk Management, Liquidity Management, Risk Modelling, Asset-Liability Management, Market Risk, Treasury Risk, Liquidity Risk,
Balance Sheet Risk, Stress Testing, Capital Management, Regulatory Reporting.
- Significance of interest rate risk for banks
- Definition of interest rate risk and its various forms
- Regulatory landscape
- Basel standards
- EBA guidelines
- PRA Pillar 2 guidance
- IRRBB link to capital
Reporting metrics: NII and EVE
- Understanding and applying the value approach
- Understanding and applying the income approach
- Methods for calculating EVE and NII sensitivity
- EVE vs MVE
IRR challenges and how to overcome them
- Assessing different types of risk – yield curve, basis, option, residual
- Modelling assumptions
- Behaviouralisation approach
- Approaches to modelling deposits
- Non-dated liabilities and their hedging
- Pipeline and pre-hedge risk
- The treatment of capital
- Balancing model sophistication and the cost of implementation
- Data quality
- Selection process of shock and stress scenarios
- Reverse stress tests
- Addressing key challenges of running stress testing exercises
- Scenario approach
- Cash versus derivative hedges
- Management actions
Implementing your IRRBB measurement solution
- The Basel Committee Standard on Interest Rate Risk in the Banking Book
- The Standardised IRR Framework
- IRR Principles
- Internal governance
- Enhanced disclosure requirements
- Assessing the operational impact of IRRBB
- What does best practice look like?
- Strategic ALM
Take this training in-house
If you have five or more delegates who wish to attend this briefing, it may be more cost effective to run it in-company. To find out more about in-company training, please contact Philip Allen Director of Learning on 0207 216 8843 or firstname.lastname@example.org