IRRBB Programme

Workshop 1: Interest Rate Risk in the Banking Book

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Interest Rate Risk in the Banking Book

Day 1 - 11 July

08:30

Registration

09:00

Overview of regulatory landscape

  • Last developments in global standards
  • Basel standards
  • New MAS guidelines 
  • Pillar 2 capital 
    • ICAAP framework
  • New standardized framework for IRRBB 
    • New six scenarios to measure changes of  the EVE
09:45

IRRBB: Typical metrics employed

  • Definition of interest rate risk and its various forms
  • Simple gap, value and income metrics
  • Use of derivatives to hedge and manage IRRBB
  • IRRBB link to capital
11:00

Morning coffee break 

11:30

Value and income metrics compared

  • Distinction between banking and trading books
  • Strengths and weaknesses of the value approach
  • Strengths and weaknesses of the income approach
  • EvE vs MvE
  • What 'best practice' looks like
13:30

Lunch 

14:30

Hedging Strategies

  • Most common hedging strategies
  • Accounting treatment of IRR derivatives (deposit, hedging)
  • Changes imposed by IFRS9
15:30

Afternoon coffee break 

16:00

IRR challenges

  • Modelling assumptions
  • This issue of non-dated liabilities and their hedging
  • Pipeline and pre-hedge risk
  • Credit spread risk - Identifying a risk measure that effectively captures CSRBB
  • Assessing different types of risk - Yield curve, basis, residual
  • Non-maturing deposits
17:00

End of day 1

Day 2 - 12 July

08:30

Registration

09:00

Implementing an IRRBB measurement solution

  • Comparing suitable/different routes for EVE and EAR
  • Evolution of IRRBB systems and processes
  • Assessing the operational impact of IRRBB
  • Internal reporting practices
  • Enhanced disclosure requirements
10:30

Morning coffee break 

11:00

Current and future issues in IRRBB governance

  • Evaluating and setting up your IRRBB governance
  • Governance of changing and operating the IRRBB setup
  • Management of assumptions and internal validation
  • IRRBB risk appetite and capital
12:30

Lunch

13:30

Stress testing

  • Selection process of shock and stress scenarios
  • Six prescribed shock scenarios
  • Reverse stress tests
  • Addressing key challenges of running stress testing exercises
  • Internal stress-testing scenarios approach
  • Regulatory deadlines and imperatives
14:30

Afternoon coffee break 

15:00

Behavioural modelling and IRR

  • Behavioural modelling assumptions 
  • Approaches to modelling deposits 
  • Economic metrics 
  • Methods for calculating EvE and NII
  • What does it mean in terms of timeframes 
  • Data requirements and sophistication required
16:30

End of training course