Interest Rate Risk in the Banking Book

Interest rate risk in the banking book (IRRBB) is part of the Basel capital framework’s Pillar 2 (Supervisory Review Process) and subject to the Committee’s guidance set out in the 2004 Principles for the management and supervision of interest rate risk (aka as the IRR Principles). The IRR Principles lay out the Committee’s expectations for banks’ identification, measurement, monitoring and control of IRRBB as well as its supervision. However, the Committee has decided that the IRR Principles need to be updated to reflect changes in market and supervisory practices since they were first published; thus the document contains an updated version that revises both the Principles and the methods expected to be used by banks for accurately measuring, managing, monitoring and controlling risks inherent to interest rates.