EBA IRRBB Guidelines

EBA IRRBB Guidelines. On the 31st of October, the European Banking Authority published a consultation paper with updated guidelines on the management and measurement of interest rate risk in the banking book. Here are the main take-aways from the newly published standards.

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Sure about the digital hunt

Twenty-five years ago, having Internet on your mobile phone was still a theoretical concept. Today, however, even your toaster fights hard to escape the Internet of Things.

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FAUC® assessment

How to deal with increased complexity and uncertainties as an organization

In the spring edition of Zanders Magazine we briefly described the scientific theory behind our Framework for Acting under Uncertainty and Complexity (FAUC®), a framework that assesses complexity and uncertainty. This is an important topic for many organizations that has only received more and more attention worldwide. Now, we offer organizations our first practical application in the form of a concrete product, the FAUC® Assessment Report. Based on our specialized framework, this report describes and analyzes the weaknesses of an organization that make it vulnerable to future uncertainties and (both positive and negative) surprises.

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Targeted review of internal models

In recent years, banks’ internal models have been subjected to an increasing amount of public scrutiny. Several benchmark studies have exposed high variability in regulatory capital calculations that cannot be explained solely by differences in risk appetite or business models(1). This variability is driven by inappropriate modeling, which takes advantage of the freedom granted by the current regulations(2). Due to this unwarranted variability in risk weighted assets (RWA), financial markets and supervisors find it difficult to compare banks to each other, resulting in a loss of confidence in regulatory capital ratios.

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Time to brush-up your bank’s IRRBB framework

Regulation on interest-rate risk in the banking book (IRRBB) is evolving after being somewhat overlooked in recent years. Banks are now updating their interest-rate risk frameworks and have important choices to make on the design of a new IRRBB framework: what are the risk types that need to be covered and how can a value and earnings measure be created? Nonetheless, this process provides an excellent opportunity for improving regulatory compliance as well as reviewing a financial organization’s benchmarks and best practices.

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