 "Reserve Bank of India, RBI")
The Reserve Bank on Friday issued final guidelines on Interest Rate Risk in Banking Book which require banks to measure, monitor, and disclose their exposure to IRRBB that may impact the capital base and future of earnings of lenders.
IRRBB refers to the current or prospective risk to banks' capital and earnings arising from adverse movements in interest rates that affect its banking book positions. Excessive IRRBB can pose a significant risk to banks' current capital base and/or future earnings.
"These guidelines, accordingly, require banks to measure, monitor, and disclose their exposure to IRRBB," the RBI said in a circular.
The final guidelines on IRRBB are in alignment with the revised framework issued by the Basel Committee on Banking Supervision (BCBS).
The RBI further said the date for implementation of the guidelines will be communicated in due course.
Also Read
"Banks are advised to be in preparedness for measuring, monitoring, and disclosing their exposure to interest rate risk in the banking book" in terms of the circular, it added.
As per the guidelines, the Board of the banks has the responsibility for understanding the nature and the level of the bank's IRRBB exposure. The Board should approve broad business strategies as well as overall policies with respect to IRRBB.
Accordingly, the circular said the Board is responsible for ensuring that steps are taken by the bank to identify, measure, monitor and control IRRBB consistent with the approved strategies and policies.
It also said banks should have a clearly defined Board approved risk appetite statement which lays down policies and procedures for limiting and controlling IRRBB.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
