Approaching IRRBB and CSRBB: a case study in line with the EBA approach

Abstract

EBA guidelines on Interest Rate Risk in the Banking Book (IRRBB) are designed to help EU banks effectively manage their interest rate risk and maintain a stable earnings stream. EBA also requires the credit spread risk from the banking book (CSRBB). Banks can effectively manage their exposure to interest rates and spread risks by implementing a comprehensive IRRBB and CSRBB management framework that includes: regular stress testing, sensitivity analysis, effective hedging strategies, and appropriate governance and risk management structures. Under those frameworks, banks must regularly monitor and report interest rates and credit spread risk metrics.