How Europe can fix the Basel IRRBB standards
Building an outlier test for interest income would be better than the standardised EVE approach
Paul Newson is the former head of non-traded market risk at Lloyds Banking Group and author of Interest Rate Risk in the Banking Book, published this month by Risk Books.
In April, Risk.net highlighted fears that the European Central Bank (ECB) might be trying to sneak in a de facto Pillar 1 capital charge for interest rate risk in the banking book (IRRBB) on the back of the current round of stress-testing capital assessments.
To be fair to the ECB, the only thing they are prescribing is the
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