Regulators forge compromise on banking book rate risk
Banks can use internal models under Pillar 1, but must also report standardised measures under Pillar 2
Banks will be able to use both internal and standardised measures to calculate capital requirements for the interest rate risk on loans and deposits – regardless of whether the capital charge is standardised or left at the discretion of national supervisors.
In its long-awaited consultation paper on interest rate risk in the banking book (IRRBB), published on June 8, the Basel Committee on Banking Supervision proposed a standardised capital framework – the so-called Pillar 1 approach – alongside
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