On 20 December 2022, ESBG sent a letter to the European Commission about the draft EBA Regulatory Technical Standards (RTS) on interest rate risks for banking book (IRRBB) supervisory outlier tests (SOT) and EBA Guidelines on IRRBB and credit spread risk in the banking book (CSRBB).

Whilst we support a revision of the framework capturing interest rate risks for banking book positions, we also believe that the 2,5% SOT threshold for the definition of “large decline” in net interest income (NII) suggested by the EBA is not appropriate as it was calibrated in a low interest rate environment. We therefore suggested that the EBA continues monitoring the normalisation of the monetary policy and only re-calibrates the threshold at a later stage more in line with current market conditions. Furthermore, we pointed out that the relative quantitative impact study was performed at consolidated level and only with a small number of large banks, which makes the calibration of the threshold even less appropriate.

Furthermore, in order to avoid different interpretations and ensure a level playing field, we stressed in relation to the EBA GL on IRRBB and CSRBB that non-marketable instruments, e. g. loans to customers, should be generally exempted from the scope of the CRSBB framework. The value of these instrument is not exposed to market fluctuations, moreover they are already covered through banks’ credit risk management processes.

The European Commission is currently reviewing the EBA RTS on IRRB SOT and is allowed to propose amendments to the text, which would eventually need to be assessed by the EBA. The Commission aims to publish the final RTS around mid-2023. For what concerns the EBA GL on IRRBB & CSRBB, the Commission cannot propose amendments but may suggest a revision to the EBA.

Looking ahead, ESBG will continue to remain engaged with the Commission during the review process.

Read the Full Letter