Interest Rate Risk in the Banking Book (IRRBB)
Course Schedule and Contents
Week 1: Tuesday 17th March
Introduction to Bank’s Balance Sheet risk – Capital, Liquidity, Market Risk
Definition of IRRBB
- “Why IRRBB matters” – illustrative examples of how NII is impacted when interest rates change
- Types of IRRBB – NII vs EVE
Introduction to Bank’s Financial Statements
Introduction to Capital Risk
- Case study: Impact of poor Capital Risk management
Introduction to Liquidity Risk
- Case study: Impact of poor Liquidity Risk management
Introduction to Market Risk
- Case study: Impact of poor Market Risk management
Governance Structure: Business, Finance, Treasury, Risk, Audit, Regulators, ALCO
Week 2: Tuesday 24th March
Starts with Q&A session from week 1
Regulatory Landscape
- Basel rules summarised
- EBA rules summarised
Measuring IRRBB
- Economic Value of Equity (EVE)
- Worked example of measuring EVE on a Bank’s Balance Sheet
- Net Interest Income (NII)
- Worked example of measuring NII on a Bank’s Balance Sheet
Significance of IRRBB underscored by real-world example:
- The case of Silicon Valley Bank (SVB)
- The case of First Republic Bank (FRC)
Week 3: Tuesday 31st March
Starts with Q&A session from week 2
Managing IRRBB
Balance Sheet Matching
- Aligning assets and liabilities to reduce exposure – benefits & drawbacks
- Worked example
Behaviouralisation of assets and liabilities
- Modelling customer behaviours on the asset side i.e. loans pre-payment hedging
- Modelling customer behaviours on the liability side i.e. non-maturing deposits
Derivatives Hedging and Hedge Accounting
- Using derivatives strategically to manage risk, supported by effective accounting practices.
- Worked example
Addressing non-parallel curve shifts
- Measurement of non-parallel risk and hedging
- Worked example
Pipeline hedging
- Assessment of risk and interplay between hedge accounting and EVE
Week 4: Tuesday 7th April
Starts with Q&A session from week 3
Steering between EVE and NII
- Competing priorities between hedging NII and EVE
- Worked example
CSRBB
- EBA rules on CSRBB
- CSRBB measurement illustration
Concludes with Q&A session for week 4
Multiple-Choice Test & Certificate:
The BTRM Advanced Treasury Masterclass Series ends with a Multiple-Choice Test. This test is available until Tuesday 14th April.
