Shocks to the system: how Basel IRRBB update affects new EU test

Disclosures suggest more banks will be classified as outliers on net interest income assessment

It never rains, but it pours. Just as banks in the European Union are preparing for a new test of the interest rate risk embedded in their banking books, the Basel Committee on Banking Supervision is proposing an updated global standard to set parameters for testing the same risk.

Absent from the discussion are any estimates of the impact the Basel Committee’s proposed changes to global shock sizes will have on the test outcomes.

Risk.net has attempted to fill the void by using the prudential

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