More EU banks will fail new IRRBB test as rates push upwards
Half of all EU banks could cross outlier threshold for new test of net interest income
Many more banks in the European Union are likely to be classified as outliers due to a new regulatory test that will check the amount of interest rate risk present in their loan and deposit books, according to bankers and consultants.
The European Banking Authority originally calibrated the rules for interest rate risk in the banking book (IRRBB) at a time when central banks were holding rates close to zero. The rule included a floor that assumed central banks would not cut rates below -1%.
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