Interest Rate Risk in the Banking Book (eBook)

A Best Practice Guide to Management and Hedging

Beata Lubinska (Autor)

eBook Download: PDF

2021 | 1. Auflage
256 Seiten
John Wiley & Sons (Verlag)
978-1-119-75502-9 (ISBN)

Infos

Introduces practical approaches for optimizing management and hedging of Interest Rate Risk in the Banking Book (IRRBB) driven by fast evolving regulatory landscape and market expectations.

Interest rate risk in the banking book (IRRBB) gained its importance through the regulatory requirements that have been growing and guiding the banking industry for the last couple of years. The importance of IRRBB is shifting for banks, away from 'just' a regulatory requirement to having an impact on the overall profitability of a financial institution. Interest Rate Risk in the Banking Book sheds light on the best practices for managing this importance risk category and provides detailed analysis of the hedging strategies, practical examples, and case studies based on the author's experience. This handbook is rich in practical insights on methodological approach and contents of ALCO report, IRRBB policy, ICAAP, Risk Appetite Statement (RAS) and model documentation. It is intended for the Treasury, Risk and Finance department and is helpful in improving and optimizing their IRRBB framework and strategy. By the end of this IRRBB journey, the reader will be equipped with all the necessary tools to build a proactive and compliant framework within a financial institution.

* Gain an updated understanding of the evolving regulatory landscape for IRRBB

* Learn to apply maturity gap analysis, sensitivity analysis, and the hedging strategy in banking contexts * Understand how customer behavior impacts interest rate risk and how to manage the consequences

* Examine case studies illustrating key IRRBB exposures and their implications

Written by London market risk expert Beata Lubinska, Interest Rate Risk in the Banking Book is the authoritative resource on this evolving topic.

Autor

BEATA LUBINSKA, PhD, is a financial engineer with over 15 years of practical experience gained in international financial institutions such as GE Capital, Deloitte and Standard Chartered Bank based both in Milan and London. She is a Treasurer at Allica Bank focused on proactive management of financial risks and Balance Sheet Management, and a member of the BTRM Faculty founded by Professor Moorad Choudhry in London. She is the author of Asset Liability Management Optimisation: A Practitioner's Guide to Balance Sheet Management and Remodelling, also published by Wiley. Beata holds a PhD from Wroclaw University of Economics in Poland.

Inhalt

Preface vii

About the Website viii

Introduction 1

Chapter 1 What is IRRBB and why is it important? 6

Subcategories of interest rate risk 8

Regulatory overview for IRRBB - what has changed? 17

ECB 2017 IRRBB stress test 21

Interest rate shocks 24

Chapter 2 How to identify and measure Interest Rate Risk in the Banking Book 29

Identification of IRRBB - case studies of the exposure to IRRBB 29

The dual nature of IRRBB 44

Exposure to short-term

interest rate risk - maturity gap analysis 45

Maturity gap analysis from the economic value perspective 63

Time bucket sensitivity analysis - PV01 68

Duration gap analysis 69

IRRBB metrics 73

Credit Spread Risk in the Banking Book (CSRBB) 81

Chapter 3 How to manage IRRBB 84

Hedging instruments for IRRBB 84

Why consider interest rate swaps? 98

Natural hedging and hedging through derivatives 98

Hedging strategies 103

Chapter 4 Behaviouralisation of items without deterministic maturity and their impact on IRRBB 117

The significance and impact of behavioural issues in the banking book 117

The reason for modelling CASA under IRRBB 118

The impact of early redemption of fixed rate assets on IRRBB 121

Basic approaches for the modelling of NMDs 121

Basic approaches for the modelling of statistical prepayment on the asset side 130

Model risk 133

Chapter 5 Interest rate risk and asset liability management 136

Management of IRRBB under strategic ALM - proactive management of IRRBB 136

Setting up the target profile and integrated management of liquidityand interest rate risk through the application of numerical optimisation technique 143

Setting up the funding strategy for a bank taking into consideration the hedging requirements 149

IRRBB and funds transfer pricing 153

Comprehensive and feasible IRRBB strategy 171

Management of the intragroup interest rate risk 172

Chapter 6 IRRBB stress test, reverse stress test and ICAAP 175

IRRBB stress testing 175

ICAAP - assessment of the internal capital to cover IRRBB 185

Chapter 7 IRRBB governance and framework 190

Risk Appetite Statement (RAS) 190

Appendix 1: Example of IRRBB policy aligned with the requirements of BCBS Standards 197

Appendix 2: Example of IRRBB model manual 211

References 239

Index 241

Produkt-Details

• Erscheint lt. Verlag: 15.10.2021
• Reihe/Serie: Wiley Finance Editions
• Reihe/Serie: Wiley Finance Editions
• Sprache: englisch
• Themenwelt: Recht / Steuern ► Wirtschaftsrecht
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung
• Schlagworte: Finance & Investments • Finance & Investments Special Topics • Finanz- u. Anlagewesen • Finanzwesen • Spezialthemen Finanz- u. Anlagewesen • Zins
• ISBN-10: 1-119-75502-6 / 1119755026
• ISBN-13: 978-1-119-75502-9 / 9781119755029