Market Risk -
Banking Book (IRRBB).
In today’s financial environment, managing Interest Rate Risk in the Banking Book (IRRBB) is essential to preserving both earnings and capital.
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Many banks have revised their risk appetite in reaction to rising rates.
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There's a growing reliance on formal governance (ALCO oversight), and limits tied to both EVE (Economic Value of Equity) and EaR (Earnings at Risk) metrics.
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Despite progress, model documentation, data lineage, and traceability remain weak spots in many institutions.
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The industry is still heavily dependent on spreadsheets and manual modelling — making control, scale, and auditability a challenge.
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Most firms currently use static modelling for EaR, but dynamic modelling and longer horizons are viewed as key development areas.
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On regulatory capital, many banks adopt the PRA’s standard IRRBB methodology (versus internal modelling) and review models annually.
Regulatory pressures are mounting:
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Supervisory outlier tests (SOTs) and new supervisory expectations are shifting how authorities evaluate IRRBB.
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In Europe, the EBA’s IRRBB / CSRBB (Credit Spread Risk in the Banking Book) guidance has heightened scrutiny of deposit behavior models, caps on non-maturity deposit assumptions, and consistency between interest income and value metrics.
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Regulators expect robust governance, documentation, model validation, and transparent risk measurement to withstand closer supervisory inspection.
How Risk Advis
Can Help
With rising expectations from markets and regulators, you need more than compliance — you need a strategic, resilient IRRBB framework. Risk Advis offers:
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Gap & maturity assessments: Benchmark your current IRRBB setup against best practice and regulatory expectations.
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Model development & validation: From static and dynamic EaR/EVE models to behavioral modeling of deposits, prepayments, optionality.
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Data architecture & lineage design: Ensure traceability, consistency, and compliance with risk data aggregation principles.
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Governance & policy enhancement: Strengthen ALCO, board reporting, limit frameworks, escalation protocols, and roles.
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Regulatory preparation & capital linkage: Help define approaches to Pillar 2 IRRBB capital, align with SOTs and integrate with ICAAP.
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System & tool implementation support: Assist in transitioning from spreadsheets to scalable, auditable platforms.
Why Choose
Risk Advis for
IRRBB Excellence
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Deep domain experience in ALM, IRRBB, and regulatory capital
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Independent, vendor-agnostic advice — driven by your needs, not product selling
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Near-term actionability + strategic outlook
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Boutique consultancy attention with senior-level involvement
Take
The Next
Step
Don’t wait until deadlines loom: Connect with our experts for a free diagnostic call and let Risk Advis help you transform regulatory pressure into strategic resilience.