The German Banking Industry Committee (GBIC) has submitted a statement to the Basel Committee on Banking Supervision (BCBS) on the consultation document "Recalibration of shocks for interest rate risk in the banking book (IRRBB)".
GBIC considers a regular inspection of the calibration of interest rate shocks for interest rate risk in the banking book (IRRBB) at certain intervals to be appropriate. While we do understand that the new methodology is designed to e.g. address existing methodological weaknesses of BCBS 368 we would like to suggest improvements that better reflect the economic reality for the management of interest rate risk.
It is important to notice that the Basel standard on IRRBB generally already contains a sufficient number of conservative components.
That means that the percentile value does not additionally need to be increased from 99.0% to 99.9%. And instead of allowing the length of time series to keep on growing, we propose modifying the history to be included to be a defined, constant rolling time window of 20 years. Furthermore we suggest that the Committee contemplates about narrowing the 50bp rounding increment to 25bp and finally to assume an adjustment speed of three months for the supervisory shock scenarios as sufficiently conservative.
