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Explore CGI's partner ecosystem to find solutions to today's challenges
Explore CGI's partner ecosystem to find solutions to today's challenges
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The Basel Committee on Banking Supervision (BCBS) recently published final interest rate risk in the banking book (IRRBB) regulations. As defined by the BCBS, “IRRBB refers to the current or prospective risk to the bank’s capital and earnings arising from adverse movements in interest rates.” To reduce excessive interest rate risk, banks will need to ensure that the right processes for identifying, measuring, monitoring and controlling IRRBB are in place. IT infrastructure alignment, in particular, is crucial to successful compliance with the new requirements.
The final IRRBB regulations—BCBS 368—were published on April 22, 2016, by the BCBS. Key updates impact requirements with respect to internal processes, public disclosure, the supervisory review process, and the identification of outlier banks.
The above principles are applicable to large international banks on a consolidated basis and are expected to be implemented by 2018. They also could potentially be applied to other non-globally operating financial institutions, if requested by a supervisor.
The new IRRBB requirements will have major implications for several bank areas, including board management, anti-money laundering, risk management, finance, modelling and IT. In terms of IT, it may be necessary to change the existing IT landscape to implement the new regulatory requirements. An IT department may be required, for example, to set up an appropriate IT infrastructure for handling the following:
If an adequate architecture is in place for delivering high-quality reports, it will be possible to prepare sophisticated hedging strategies for ensuring a bank’s future success. Overall, the impact of IRRBB should not be underestimated, especially in light of the high probability of rising interest rates in the coming years.
In terms of compliance, leading banks are looking for partners to help them navigate the new IRRBB terrain. Look for a partner with significant expertise in developing and implementing core banking processes and with addressing regulatory-driven risk management and compliance issues. More specifically, seek a partner with strong capabilities in the following areas:
As a global IT consultancy firm, CGI is working to provide the necessary services to identify and execute the required steps for implementing the new IRRBB requirements. For more information on our work in this area and to discuss your specific IRRBB compliance issues, contact us at banking.solutions@cgi.com.
Alexander Tjardes is a lead consultant in financial services for CGI with substantial banking expertise, particularly in the areas of regulatory reporting and risk management. He has extensive knowledge of financial markets and products, as well as the management of interest rate risk and market ...
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