The Basel Committee on Banking Supervision is consulting on proposed additional Pillar 2 guidance on interest rate risk in the banking book (IRRBB). The proposals respond to shortcomings identified in banks’ management of IRRBB, particularly during periods of elevated inflation, sharp interest rate increases and heightened market volatility.
The proposed guidance would complement the existing IRRBB framework by strengthening expectations for banks’ risk management and supervisory oversight. It includes additional guidance on model risk management and validation, stress testing, IRRBB controls, the treatment of embedded gains and losses in securities portfolios, and short- and medium-term earnings indicators.
The Committee also proposes introducing “Supervisory Information”: information reported by banks to support supervisors’ ongoing monitoring and examinations of IRRBB. This would support more effective supervisory assessments, including peer comparisons and earlier identification of banks with potentially excessive IRRBB exposures.
The proposed changes include amendments to the Basel Framework’s IRRBB provisions in SRP31 and related application guidance in SRP98. Once finalised, and subject to the Committee’s separate consultation on consequential amendments to the consolidated guidelines, the updated guidance in SRP98 would be incorporated into MIR20 of the consolidated guidelines.
The Committee welcomes comments on the proposed changes set out in the consultative document by 9 February 2027.