BaFin has now implemented the key points of the EBA Guidelines 2015/08 with its Circular 9/2018 from 12 June 2018, thus repealing RS 11/2011 (BA).
What will change? The abolition of the alternative standardized framework might be particularly important for smaller banks. The banks' request to keep the alternative framework was rejected by the supervisory authority. However, a transition period in line with that of MaRisk has been granted until 31 October 2018. All banks must henceforth measure interest-rate risk according to both earnings and economic-value perspectives and report the results to the supervisory authorities. Both views can be challenging. In determining the economic value, the consideration of automatic and behaviour-dependent options in quantifying interest-rate risks will pose a particular challenge. The standard shift of +/-200 basis points is now subject to a floor rule that considers the current low-interest-rate environment. The EBA guideline of focusing the interest-rate shock on the 1st and 99th percentile of historical interest-rate changes, in line with a VaR perspective, was not implemented.
The changes introduce several methodological difficulties. This naturally also applies to their technical implementation. Abacus Risk Solutions provides proven solutions for quantifying interest-rate risk. In doing so, considerable synergies can be achieved with respect to the data delivery for other reports.