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Banking Rule Book
Text applicable on 7 Oct 2026Consolidated version of 1 Jan 2019In forceUnofficial text · authentic on EBA (PDF) (opens in a new tab)

GL-ST paragraph 166 — as applicable on 7 Oct 2026 (version of 1 Jan 2019)

4.7.7

Interest rate risk from non-trading activities

164.

This section is without prejudice to the EBA Guidelines on interest rate risk arising from non-trading activities.

165.

Stress tests should support and be an integral part of the interest rate risk in the banking book (IRRBB) internal management system.

166.

The interest rate scenarios used for stress testing purposes, including for the purposes of the application of Article 98(5) of Directive 2013/36/EU for the interest rate risk arising from the non-trading activities, should be adequate to identify all material interest rate risks, e.g. gap risk, basis risk and option risk.

167.

Institutions should ensure that the tests referred to in the previous paragraph are not only based on a simple parallel shift but that they consider movements and changes in the shape of the yield curves in their scenario analyses.

168.

Institutions should consider the following elements:

a)

the spread risk, which arises from reference rates mismatching between time-matched funding and investments; and

b)

early termination risks included in contracts with an embedded option, which might force the institution into a new transaction on less favourable terms.

169.

Institutions should be aware of potential indirect interest rate effects triggering losses elsewhere (e.g. that a pass-through onto lending rates could trigger further credit risk losses because of a deterioration in customers’ ability to pay).

170.

Where less complex financial instruments are employed, institutions should calculate the effect of a shock using sensitivity analysis (without the identification of the origin of the shock, and by means of the simple application of the shock to the portfolio). Where an institution uses more complex financial instruments on which the shock has multiple and indirect effects, it should use more advanced approaches with specific definitions of the adverse (stress) situations reflecting relevant idiosyncratic risks.