A fresh take on risk and valuation
With the entry in force of the 2019 EBA guidelines, IRRBB presents new challenges impacting your Banking Book. The new framework imposes a dual view on interest rate risk, with the aim to protect both the capital (Economic Value of Equity) and the profitability (Net Interest Income) of your institution. The regulator has also raised the expectations for the modelling of behavioural optionalities such as prepayment risk and non-maturity deposits.
Having a second look at your processes, dealing with identification, measurement, monitoring and controlling has thus become increasingly important.
Our IRRBB service is a comprehensive modular approach guaranteeing compliance and addressing data, analytics, modelling and reporting issues. It extends from identifying the IR risks in the Banking Book and assessing the potential gaps, to designing measurement and monitoring solutions. In addition, it tackles the automation of risk processes, the framing of effective internal controls and the design of management information systems, ensuring a strong comprehensive governance of IRRBB.
We help in designing a complete and transparent interest rate risk framework.
We bring in the experience of a multidisciplinary team of experts with extensive exposure to regulatory and non-regulatory models.
Review or Validation of your existing practice and identification of gaps with the regulatory requirements.
We ensure the integration of your interest rate risk models in the institution’s business decisions.
Rely on Finalyse’s experience in pricing and valuation to ensure top notch methodologies in interest rate modelling.
State-of-the-art modelling of your balance-sheet’s behavioural optionalities: prepayment risk, non-maturity deposits, …
This post demonstrates step-by-step a possible way to conduct Non-Maturity Deposit Modeling. It shows the practical challenges, taking as an example the overnight deposit rates in Hungary. In the current low-interest-rate environment, the modelling of non-maturity deposits has attracted interests from Banks. These models are used for critical purposes in banks such as the management of the interest rate risk of the balance sheet, or in their earnings, as it is now also expected from supervisory authorities. Finally, they are also used to determine a transfer price for deposits, to retribute the business lines in charge of collecting the deposits appropriately.
Read