A Bank must have an appropriate IRRBB strategy and risk governance framework that provides a bank-wide and if applicable Group-wide view of IRRBB. This includes policies and processes to identify, measure, evaluate, monitor, report and control or mitigate material sources of IRRBB on a timely basis.
A Bank’s IRRBB strategy, policies and processes must be consistent with the risk appetite statement, risk profile and systemic importance of the Bank, taking into account market and macroeconomic conditions.
A Bank’s IRRBB strategy, policies, and processes must be reviewed at least annually and appropriately adjusted, where necessary, in line with the Bank’s changing risk profile and market developments.
A Bank’s strategy, policies and processes for IRRBB must be approved and reviewed at least annually by the Board.
The Senior Management must ensure that the strategy, policies and processes are developed and implemented effectively.
A Bank’s policies and processes must establish an appropriate and properly controlled IRRBB environment, including, at a minimum, the following items:
Comprehensive and appropriate interest rate risk measurement systems;
Regular review and independent (internal or external) validation of any models used by the functions tasked with managing IRRBB, including review of key model assumptions;
Appropriate limits that are approved by the Board and Senior Management and that reflect the Bank’s risk appetite, risk profile and capital strength, and are understood by and regularly communicated to, relevant staff;
Effective processes for exception tracking and reporting which ensure prompt action at the appropriate level of the Senior Management or Board, where necessary; and
Effective information systems for accurate identification, aggregation, monitoring and timely reporting of IRRBB exposure to the Board and Senior Management.