IRRBB

The management of IRRBB with BearingPoint’s Abacus360 Banking

In response to regulations it is imperative that trading and non-trading transactions be subject to a more accurate risk assessment in the future than what was previously done. For banks, the management of the interest rate risk in the banking book (IRRBB) is becoming more and more complex according to the requirements of the EBA Guidelines EBA / GL / 2015/08 and the BCBS 368 requirements and the increased complexity. The management of IRRBB has been increasing in importance since 2004 which is shown by the higher frequency and larger scale of regulation.

Based on the high demand for IRRBB, BearingPoint offers a module for the management of IRRBB, which is perfectly embedded in BearingPoint’s Abacus360 Banking solution, an integrated platform for 360° reporting, risk calculation and controlling regulatory KPIs. The main products for the management of IRRBB are loans, securities, overnight deposits and time deposits. Pursuant to the EBA guideline EBA/GL/2015/08 and the standard BCBS 368, Abacus360 Banking measures the IRRBB via the Economic Value Perspective, which measures the long-term effect of interest rate changes, in which the focus lies on the extent of the change in the net cash (the difference between receivables and liabilities) of future cash flows that has been caused by changes in interest rates.

In aggregate the module is capable of calculating the four major interest rate risks: Option Risk, Repricing Risk, Yield Curve Risk and Basis Risk.

All risk types (including combinations) can lead to falling interest margins and corresponding EV effects.

The management of IRRBB has been a response to regulations requirement like the EBA guidelines EBA/GL/2015/08 and the standard BCBS 368 for the need of a more accurate risk assessment for trading and non-trading transactions, that are essential for banks.

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