Duration 2 days – 14 hrs
Overview
This Interest Rate Risk in the Banking Book (IRRBB) Training Course is designed to provide banking professionals in the Philippines with a comprehensive understanding of how interest rate fluctuations can impact a bank’s financial stability. The course will cover the measurement and management of interest rate risk, including essential risk metrics, regulatory expectations, and stress testing methods. Additionally, participants will gain insights into asset and liability management (ALM) strategies, behavioral assumptions, and the importance of aligning IRRBB practices with regulatory standards.
Objectives
- Understand the fundamental concepts of interest rate risk in the banking book (IRRBB).
- Measure and manage interest rate risk through practical methodologies and tools.
- Apply behavioral assumptions effectively to predict interest rate impacts.
- Gain knowledge of regulatory requirements for IRRBB and compliance standards.
- Conduct stress testing for interest rate risk and interpret results for risk mitigation.
Audience
- Risk Managers and Analysts
- Treasury and ALM Professionals
- Banking Executives responsible for risk and financial stability
- Compliance Officers involved in regulatory reporting
- Financial Analysts specializing in interest rate risk
- Internal Auditors focused on risk and ALM
Pre- requisites
- Basic understanding of banking operations and financial principles.
- Familiarity with asset and liability management (ALM) is beneficial but not mandatory.
Course Content
Introduction to Interest Rate Risk in the Banking Book (IRRBB)
- Overview of interest rate risk and its significance for banks
- Understanding the impact of interest rate fluctuations on a bank’s balance sheet
- Introduction to IRRBB in the context of the banking book vs. trading book
Measuring and Managing Interest Rate Risk
- Key metrics for measuring interest rate risk: economic value of equity (EVE), net interest income (NII)
- Duration and gap analysis techniques
- Practical tools and techniques for managing IRRBB
Behavioral Assumptions in IRRBB
- Overview of behavioral assumptions and their importance in IRRBB
- Assessing non-maturity deposits and prepayment rates
- Impact of customer behaviors on interest rate risk modeling
- Best practices for incorporating behavioral assumptions into IRRBB
Asset and Liability Management (ALM) and Risk Metrics for IRRBB
- Overview of ALM and its role in managing interest rate risk
- ALM strategies for mitigating IRRBB exposure
- Core risk metrics for ALM: sensitivity analysis and basis point shocks
- Integrating ALM practices with IRRBB management
Regulatory Expectations for IRRBB
- Overview of IRRBB regulatory requirements in the Philippines and international standards (e.g., BCBS guidelines)
- Key regulatory metrics for IRRBB and reporting requirements
- Importance of regulatory compliance in managing interest rate risk
- Case studies on regulatory audits and IRRBB compliance issues
Stress Testing for Interest Rate Risk
- Understanding stress testing requirements for IRRBB
- Developing and implementing stress testing scenarios
- Analyzing stress testing results and aligning with regulatory expectations
- Workshop: Creating a stress testing model and interpreting outcomes
Practical Application and Case Studies
- Case studies of IRRBB implementation in Philippine and international banks
- Lessons learned from interest rate risk management failures
- Practical workshop on calculating IRRBB metrics and managing risk exposure
Future Trends in IRRBB and ALM
- Emerging trends in interest rate risk management and ALM
- Impact of new interest rate benchmarks and changing economic conditions
- Preparing for potential changes in regulatory guidelines
