Předchozí Příští

Interest Rate Risk in the Banking Book

18. - 19. 10. 2018
35.500 Kč
Praha, hotel NH Prague
Gary Dunn

A comprehensive overview of the BCBS IRRBB standards, comparison with EBA standards and a refresher of the mathematical tools required

    How you will benefit:
  • An understanding of the revised standards
  • Gain theoretical and practical understanding of IRRBB methodology
  • Understand links between IRRBB and other regulatory initiatives such as FRTB and liquidity risk management.
  • Understand risk transfer, fund transfer pricing
  • Gain experience of facing regulatory challenge on proposed model.
The course has three main objectives:
  • To provide a comprehensive overview of the new standards presented in BCBS paper D368 and compare them with existing requirements set out in 2004 and requirements set out by the EBA.
  • Provide a refresher course to participants in the necessary mathematics required to construct zero curves, obtain discount factors and compute EVE and NII. This will involve numerical examples and case studies including constructing a regulatory report based on the standardised framework proposed in D368. A role-playing exercise will be used to practice engagement with a regulator, defending assumptions and responding to likely regulatory challenge.
  • Look at the interaction of banking book interest rate risk with other areas of regulation, for example covering topics such as risk transfer, fund transfer pricing, liquidity risk capture in FRTB and interactions between the banking book and the trading book.

Those with less quantitative backgrounds should not be discouraged by the mathematical content. Spread sheet examples will be provided with all data and formulae that will allow all participants to engage in what-if scenarios to gain a feel for how different assumptions can affect the results in regulatory reports and the likely challenges. Participants will be invited to work in groups to prepare a report based on their own assumptions and a role-playing session will be used to give participants experience of a meeting with regulators to review their submissions.

Who should attend?
    Analysts, Vice Presidents, Directors, Senior Managers in:
  • Treasury Functions
  • Capital Management
  • Regulatory Compliance
  • Governance
  • Audit
  • Risk Analytics
  • Market Risk Management
Laptop recommended
Doporučujeme účastníkům přinést si vlastní notebook vybavený MS Excelem, aby mohli samostatně provádět praktická cvičení a tím maximalizovali užitek z tohoto semináře.

09.15 - 12.15


  • Definition of IRRBB
  • Accounting and IRRBB
  • Changes in the Basel III Framework
  • Components of interest rates
    • Risk free rate, duration spread, liquidity spread, credit spreads, commercial margins
    • IRRBB and credit spread risk
  • Measurement of IRRBB
    • Earnings based measures - NII
    • Economic value based measures - PV01, EV, EVE and EVaR
    • Interest rate scenarios
    • Options
    • Non maturing deposits - behaviouralisation, core deposits

Refresher 1

  • Time value of money
  • Forward Rates
  • Compounding and day count conventions
    • Net Present Value of a future cash flow - bond example
    • PV01, duration and convexity
  • Study Example

Draft Revised CRD and CRR

  • CRD - Articles 84, 98
  • CRR - Articles 106, 448

12.15 - 13.15 Lunch

13.15 - 17.00


  • IRRBB - Scope and timelines
  • IRR Principles:
    • Comparison with current EBA requirements and bcbs 2004 (BCBS 108)
    • Discussion of Principles
  • US Implementation (optional)
  • Draft Revised CRD and CRR

Refresher 2

  • Constructing zero curves
  • Discount factors
  • Forward Curves
  • Interest Rate Swap Curves
  • Study Example

BCBS D368 - The standardised Framework

  • Overall structure
  • The components
  • Treatment of NMDs and capital
  • Behavioural options
  • Contractual options

Friday, October 19th

09.00 - 12.15

Calculation of the standardised EVE risk measure and NII

  • Case study using bank disclosures and based on D368 reporting requirements
    • Construct calculations and report using provided Spreadsheet
    • Discuss base assumptions and bank performance under the prescribed regulatory scenarios
    • Split into groups and consider revised submission
  • Role-play, face the regulator - a Pillar 2 meeting

Managing Interest Rate Risk

  • Hedging duration risk
    • Bonds
    • Futures
    • Swaps
  • Hedging convexity risk
    • Options
  • Simulation Models, Monte Carlo and option pricing
    • Behavioural Options

12.15 - 13.15 Lunch

13.15 - 17.00

Comparison with revised market risk rules for the trading book (FRTB BCBS D352)

  • Introduction to FRTB
  • Trading book/banking book boundary definition under FRTB
  • Risk transfers from banking book to trading book
  • Standardised approach for interest rate risk under FRTB
  • Interest rate VaR (EVAR)
    • Expected Shortfall
    • Liquidity Horizons

Backtesting and model validation

Stress Testing

  • Supervisory scenarios
  • Bank scenarios
  • Assigning probabilities to stress scenarios
    • A Monte Carlo Approach
    • A Bayesian approach

Related Topics

  • Risk Appetite Frameworks

Evaluation and Termination of the Course

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