# IRRBB Policy and Report: [Institution name] [Reporting date]

> Interest rate risk in the banking book (IRRBB) policy and periodic
> measurement report for a bank: scope (IRRBB and credit spread risk in
> the banking book, CSRBB), risk appetite and limits, behavioural
> assumptions, economic value of equity (EVE) and net interest income
> (NII) methodologies, supervisory outlier test results, internal
> scenarios, hedging, model validation, disclosure and sign-off. It
> follows EU Directive 2013/36/EU (CRD) Articles 84 and 98(5),
> Commission Delegated Regulations (EU) 2024/856 (supervisory outlier
> tests) and 2024/857 (standardised methodologies), EBA guidelines
> EBA/GL/2022/14, and the Basel Committee standard "Interest rate risk
> in the banking book" (2016) with the shock recalibration of July 2024
> (to be implemented by 2026-01-01), cited by name only. Replace every
> `[bracketed]` value and every row marked *Example*. Obtain the
> regulations and guidelines for the normative text. This is a document
> format, not financial, legal, regulatory or accounting advice.

<!--
Guidance: How to use this template
- Part A (sections 1 to 5) is the policy: approve it once a year and
  change it only through the governance in section 1. Part B (sections
  6 to 11) is the report: produce it at least quarterly for ALCO and
  the board risk committee, and for regulatory reporting dates.
- Keep the two economic views side by side. EVE shows the change in
  the present value of all banking-book cash flows; NII shows the
  change in earnings over a horizon. A bank can look safe on one and
  exposed on the other, and supervisors test both.
- The worked example uses "Fernhollow Bank", a fictional mid-sized EU
  credit institution (total assets EUR 47,400 million, Tier 1 capital
  EUR 3,400 million or 17.0% of a total risk exposure amount of EUR
  20,000 million, at 2026-12-31). The repricing positions and the
  shocks in the example are simplified for illustration; real
  calculations revalue every cash flow under the prescribed shock
  curves.
- Related documents: ICAAP Report (`finance/icaap-report`), where IRRBB
  capital is assessed; Risk Appetite Statement
  (`finance/risk-appetite-statement`); FX and Interest Rate Hedging
  Policy (`finance/fx-interest-rate-hedging-policy`) for corporate
  treasuries; Model Validation Report (`ai-data/model-validation-report`)
  for the behavioural models; Model Risk Management Policy
  (`finance/model-risk-management-policy`).
-->

## Document control

<!-- Guidance: Record both the policy version and the report date. Supervisors compare the report with the policy in force on that date, so keep the link explicit. -->

| Field | Value |
|---|---|
| Document ID | [IRRBB-YYYY-QN] *Example:* IRRBB-2026-Q4 |
| Institution and perimeter | [Entity / group] *Example:* Fernhollow Bank, consolidated |
| Policy version in force | [Version and approval date] *Example:* IRRBB policy v4.0, approved 2026-03-26 |
| Reporting date | [YYYY-MM-DD] *Example:* 2026-12-31 |
| Measurement approach | [Internal system / standardised / simplified standardised] *Example:* Internal measurement system, benchmarked against the standardised methodology |
| Currency and units | [EUR million] |
| Version | [1.0] |
| Status | [Draft / In review / Approved] |
| Owner | [@head-of-alm] |
| Approvers/reviewers | [@cro], [@alco-chair], [board risk committee] |
| Last updated | YYYY-MM-DD |
| Classification | [Confidential] |
| Next scheduled review | [YYYY-MM-DD] |

### Approvals

| Role | Name | Decision | Date |
|---|---|---|---|
| Head of asset and liability management (preparer) | [@name] | [Submitted] | YYYY-MM-DD |
| Market and liquidity risk (second line) | [@name] | [Independent review completed] | YYYY-MM-DD |
| ALCO | [@chair] | [Recommend] | YYYY-MM-DD |
| Board risk committee | [@chair] | [Approve policy / note report] | YYYY-MM-DD |

### Revision history

| Version | Date | Author | Change summary |
|---|---|---|---|
| 0.1 | YYYY-MM-DD | [@name] | Quarterly measurement completed |
| 0.2 | YYYY-MM-DD | [@name] | Second-line challenge on deposit assumptions incorporated |
| 1.0 | YYYY-MM-DD | [@name] | Approved |

## Contents

- [1. Policy scope, governance and appetite](#1-policy-scope-governance-and-appetite)
- [2. Risk definitions and perimeter](#2-risk-definitions-and-perimeter)
- [3. Behavioural assumptions](#3-behavioural-assumptions)
- [4. Measurement methodology](#4-measurement-methodology)
- [5. Hedging strategy and limits framework](#5-hedging-strategy-and-limits-framework)
- [6. Report summary](#6-report-summary)
- [7. Repricing profile](#7-repricing-profile)
- [8. EVE and NII results and supervisory outlier tests](#8-eve-and-nii-results-and-supervisory-outlier-tests)
- [9. Internal scenarios and CSRBB](#9-internal-scenarios-and-csrbb)
- [10. Model validation and data quality](#10-model-validation-and-data-quality)
- [11. Disclosure, actions and sign-off](#11-disclosure-actions-and-sign-off)
- [12. Glossary and references](#12-glossary-and-references)
- [Standard and licence note](#standard-and-licence-note)

## 1. Policy scope, governance and appetite

<!-- Guidance: Say which entities and books are covered, who owns IRRBB, who measures it independently and who approves limits. A common pitfall is a policy whose appetite is expressed only in EVE terms, leaving earnings exposure ungoverned. -->

### 1.1 Purpose and legal basis (as of 2026-10, check local law)

This policy sets how [Institution name] identifies, measures, limits,
hedges and reports the risk that changes in interest rates and credit
spreads reduce its economic value or its earnings from banking-book
positions. Trading-book interest rate risk is governed by the market
risk framework instead.

| Jurisdiction | Basis | Use in this document |
|---|---|---|
| EU | CRD Article 84 (internal systems, standardised methodology and simplified standardised methodology for IRRBB) and Article 98(5) (supervisory outlier tests and supervisory powers) | Sections 4 and 8 |
| EU | Commission Delegated Regulation (EU) 2024/856 (supervisory shock scenarios, common modelling and parametric assumptions, what constitutes a large decline) | Section 8 |
| EU | Commission Delegated Regulation (EU) 2024/857 (standardised and simplified standardised methodologies) | Section 4.4 |
| EU | EBA/GL/2022/14, guidelines on IRRBB and CSRBB | Sections 2 to 10 |
| EU | EBA/GL/2026/06, revised SREP guidelines (apply from 2027-01-01), assessment of IRRBB and CSRBB by supervisors | Section 10 |
| EU | CRR Article 448 (Pillar 3 disclosure of IRRBB) | Section 11 |
| International | Basel Committee standard "Interest rate risk in the banking book" (April 2016), Basel Framework chapters SRP31 and DIS70; "Recalibration of shocks for interest rate risk in the banking book" (2024-07-16, implement by 2026-01-01) | Names and chapter IDs only; EU institutions apply the shock parameters in Delegated Regulation (EU) 2024/856 until it is amended, so check whether the 2024 recalibration has been transposed |
| UK | PRA rules and supervisory statements on IRRBB | Name only; UK entities add PRA requirements |
| US | Interagency Advisory on Interest Rate Risk Management (2010) and its FAQ (2012) | US branch context only |

### 1.2 Roles

| Role | Responsibility |
|---|---|
| Management body | Approves the IRRBB appetite and this policy annually; receives the quarterly report summary |
| Board risk committee | Reviews limit utilisation, breaches, outlier test results and model validation conclusions |
| ALCO | Sets sub-limits, approves hedging strategy and behavioural assumptions, decides on breach remediation |
| Treasury and ALM (first line) | Manages the position, executes hedges, produces measurements |
| Market and liquidity risk (second line) | Independently reviews measurements, challenges assumptions, monitors limits, escalates breaches |
| Model validation | Validates behavioural and measurement models under the model risk policy |
| Internal audit | Reviews the IRRBB framework periodically |

### 1.3 Risk appetite and limits

| ID | Metric | Appetite statement | Early warning | Limit | Owner |
|---|---|---|---|---|---|
| IRL-01 *(Example)* | Worst EVE decline across the six supervisory shocks, as % of Tier 1 | Stay well inside the supervisory outlier threshold | 9% | 12% | ALCO |
| IRL-02 *(Example)* | Worst 12-month NII decline across the parallel shocks, as % of base NII | Earnings resilient to a 200 bp move | 6% | 8% | ALCO |
| IRL-03 *(Example)* | EVE sensitivity per basis point (PV01) of the EUR position | Directional exposure kept moderate | EUR 1.0m | EUR 1.3m | Treasury |
| IRL-04 *(Example)* | CSRBB economic value loss under internal spread shock, as % of Tier 1 | Contain spread risk in the liquidity portfolio | 6% | 8% | ALCO |
| IRL-05 *(Example)* | Share of non-maturity deposits modelled as core with maturity above 5 years | Avoid overstating deposit stability | 0% | 0% (hard cap) | Market risk |
| IRL-06 *(Example)* | Same NII decline as % of Tier 1 (supervisory outlier test metric, threshold 5%) | Stay well inside the supervisory NII threshold | 3% | 4% | ALCO |

## 2. Risk definitions and perimeter

<!-- Guidance: Define gap, basis and option risk and CSRBB, and list the instruments in scope. A pitfall is excluding instruments from CSRBB without documenting why; the EBA guidelines expect any exclusion to be justified. -->

IRRBB has three components. Gap risk arises from the timing of
repricing of assets and liabilities and the shape of the yield curve,
covering parallel and non-parallel moves. Basis risk arises when
instruments with similar repricing tenors are priced off different
reference rates, for example a loan linked to a three-month benchmark
funded by deposits whose rates follow the central bank deposit rate
with a lag. Option risk arises from explicit options (caps, floors,
swaptions held in the banking book) and from behavioural options
embedded in client products: prepayment of fixed-rate mortgages, early
withdrawal of term deposits and the ability of depositors to move
non-maturity balances. CSRBB is the risk from changes in the market
price of credit risk, liquidity and other characteristics of
banking-book instruments that are not explained by IRRBB or expected
credit losses.

| Perimeter item | In scope | Treatment *(Example)* |
|---|---|---|
| Loans and advances at amortised cost | IRRBB | Contractual and behavioural cash flows |
| Debt securities at amortised cost and at fair value through OCI | IRRBB and CSRBB | Full revaluation |
| Customer deposits | IRRBB | Behavioural model for non-maturity deposits |
| Issued debt (covered bonds, senior, Tier 2) | IRRBB | Contractual cash flows; own credit spread excluded from CSRBB |
| Banking-book derivatives (hedges) | IRRBB | Full revaluation |
| Equity, fixed assets, non-interest items | Excluded from EVE cash flows | Equity is not a liability in EVE |
| Pension obligations | [Assess] | [Treatment] |

## 3. Behavioural assumptions

<!-- Guidance: Document every behavioural assumption with the data, period and method used, its validation status and its sensitivity. The deposit model drives most of the EVE result in a retail bank, so give it the most space and challenge. -->

Behavioural assumptions convert contractual cash flows into expected
cash flows. They are the largest source of model risk in IRRBB. For
non-maturity deposits, split balances into stable and non-stable parts
and, within the stable part, a core portion whose rate does not move
with market rates, and estimate the repricing profile of the core part
from at least [ten] years of data including a period of rising rates.
For prepayments, estimate a base conditional prepayment rate and its
sensitivity to rate incentives. For term deposits, estimate early
redemption rates and their dependence on the rate environment. Each
assumption must be approved by ALCO, validated independently and
reported with a sensitivity that shows the effect of a reasonable
alternative.

| ID | Assumption | Value *(Example)* | Data and method | Sensitivity tested | Validation status |
|---|---|---|---|---|---|
| BA-01 *(Example)* | Retail current accounts, core share | 70% of balances | Rolling minimum balance analysis, 2012 to 2026 | Core share 60%: EVE parallel up loss falls by EUR 30m | Validated 2026-05 |
| BA-02 *(Example)* | Core retail current accounts, average repricing maturity | 2.8 years | Replicating portfolio of fixed tranches up to 5 years | 2.3 years: steepener loss falls by EUR 20m | Validated 2026-05 |
| BA-03 *(Example)* | Online savings, pass-through rate (beta) | 65% of policy rate change within 3 months | Regression on 2022 to 2024 hiking cycle | Beta 80%: NII parallel up gain falls by EUR 15m | Validated 2026-05 |
| BA-04 *(Example)* | Mortgage prepayment, base rate | 6% a year | Logistic model on refinancing incentive | 9%: EVE parallel down gain falls by EUR 25m | Validation finding open (VF-2026-03) |
| BA-05 *(Example)* | Term deposit early redemption | 3% a year, rising to 8% when market rates exceed deposit rate by 150 bp | Historical redemptions | Not material | Validated 2025-11 |

## 4. Measurement methodology

<!-- Guidance: Describe the EVE and NII calculations in enough detail that a reviewer can reproduce them: discounting curves, treatment of margins, floors, balance sheet assumptions and horizons. State where the supervisory outlier test parameters differ from the internal measurement. -->

### 4.1 Economic value of equity

EVE is the present value of banking-book asset cash flows minus the
present value of banking-book liability cash flows, excluding equity.
The change in EVE under a shock is the difference between the
post-shock and the base present values. The internal measure uses a
risk-free discount curve, includes commercial margins [or excludes
them, state which] and runs off the balance sheet (no new business).
For the supervisory outlier test the parameters of Delegated
Regulation (EU) 2024/856 apply, including the treatment of commercial
margins, the post-shock interest rate lower bound and the cap on the
repricing maturity of non-maturity deposits; check the current text.

For a simple illustration, the change in EVE can be approximated from
net repricing positions $P_i$ in time buckets with mid-point tenors
$t_i$ (used here as a stand-in for modified duration) and bucket
shocks $\Delta r_i$:

$$
\Delta EVE \approx -\sum_{i} P_i \, t_i \, \Delta r_i
$$

A positive net position (more assets than liabilities repricing in a
bucket) loses value when rates in that bucket rise. Real measurement
revalues every cash flow under the full shocked curve, including
optionality and the lower bound, so the approximation is for reading
the results, not for producing them.

### 4.2 Net interest income

The NII measure projects interest income and expense over a
twelve-month horizon (and a [three]-year horizon for internal steering)
under a constant balance sheet: maturing positions are replaced with
the same type, size and margin. Shocks are applied instantaneously.
The first-order approximation for the change in twelve-month NII from
repricing gaps $G_k$ that reprice at month $m_k$ is:

$$
\Delta NII \approx \sum_{k} G_k \, \Delta r \, \frac{12 - m_k}{12}
$$

### 4.3 Internal scenarios

In addition to the six supervisory shocks, the bank runs historical
scenarios (for example the 2022 to 2023 hiking cycle replayed on the
current balance sheet), hypothetical scenarios agreed with the
economics team, basis risk scenarios (benchmark rates and deposit rates
diverging) and a reverse scenario that finds the rate path breaching
the EVE limit. Results are in section 9.

### 4.4 Standardised methodology

Where the competent authority considers an institution's internal
measurement system unsatisfactory, it may require the institution to
use the standardised methodology (CRD Article 84), and
small and non-complex institutions may use the simplified standardised
methodology, both set out in Delegated Regulation (EU) 2024/857. Even
where the internal system is used, run the standardised methodology at
least [annually] as a benchmark and explain material differences.

## 5. Hedging strategy and limits framework

<!-- Guidance: Explain what the bank wants its interest rate position to be and how it uses derivatives and natural hedges to get there. Link hedge accounting to economic hedging but keep the economic objective first. A pitfall is hedging the EVE position so fully that NII becomes highly sensitive to falling rates. -->

The bank's structural position is driven by fixed-rate mortgages on
the asset side and stable, low-beta deposits on the liability side.
The strategy is to keep EVE sensitivity within limits while preserving
the earnings stability provided by the deposit franchise. Pay-fixed
interest rate swaps on the mortgage book reduce the long-end asset
position; receive-fixed swaps on part of the core deposit replicating
portfolio stabilise NII. Hedge accounting (portfolio fair value hedge
or cash flow hedge) is chosen to reflect the economic hedge in the
accounts, documented separately per hedge relationship.

| ID | Hedge programme | Instrument | Notional *(Example)* | Objective | Accounting |
|---|---|---|---|---|---|
| HP-01 *(Example)* | Mortgage book macro hedge | Pay-fixed EUR swaps, 5 to 10 years | 2,000 | Reduce EVE loss in rising rates | Portfolio fair value hedge |
| HP-02 *(Example)* | Core deposit replication | Receive-fixed EUR swaps, 1 to 5 years | 1,500 | Stabilise NII in falling rates | Cash flow hedge |
| HP-03 *(Example)* | Liquidity portfolio | Asset swaps on fixed-rate government bonds | 1,200 | Remove rate risk, keep spread exposure | Fair value hedge |

Limit breaches are escalated by the second line to the ALCO chair on
the day of detection; ALCO decides within [five] business days whether
to hedge, accept with a time-bound waiver or change the strategy, and
the board risk committee is informed at its next meeting. A breach of
the supervisory outlier threshold is reported to the competent
authority as required.

## 6. Report summary

<!-- Guidance: Give the reader the headline numbers, limit status and changes since last quarter on one page. -->

| Item | Result *(Example, 2026-12-31)* | Limit or threshold | Status |
|---|---|---|---|
| Worst EVE decline, six supervisory shocks | -215 (parallel up), 6.32% of Tier 1 | Internal limit 12%; supervisory outlier threshold 15% | Within |
| Worst 12-month NII decline, parallel shocks | -59 (parallel down), 5.6% of base NII; 1.73% of Tier 1 | Internal limit 8% of NII (IRL-02); 4% of Tier 1 (IRL-06); supervisory outlier threshold 5% of Tier 1 | Within, approaching the IRL-02 early warning (6%) |
| CSRBB economic value loss, internal spread shock | -81, 2.38% of Tier 1 | Internal limit 8% | Within |
| Changes since previous quarter | EVE parallel up loss increased by EUR 25m after mortgage growth | Not applicable | Hedge HP-01 to be increased by EUR 300m (A-IR-01) |

Tier 1 capital is EUR 3,400 million (17.0% of a TREA of EUR 20,000
million). Base twelve-month NII is EUR 1,050 million.

Write the narrative for a board reader in four short paragraphs: what
the position is and why (the structural drivers in section 7), how it
changed since the previous report and which business or hedging
decision caused the change, how close each metric is to its early
warning and limit, and what management proposes. Avoid restating the
tables; interpret them. When EVE and NII point in opposite directions,
as they do here (EVE loses in rising rates while NII gains, and the
reverse in falling rates), say which risk the bank prefers to carry
and why that choice is consistent with the risk appetite.

## 7. Repricing profile

<!-- Guidance: Show the net repricing position by time bucket after behavioural assumptions and hedges, so that the reader can see where the exposure sits. -->

| Bucket | Mid-point tenor (years) | Assets repricing *(Example)* | Liabilities repricing *(Example)* | Net position after hedges |
|---|---|---|---|---|
| Up to 1 year | 0.5 | 21,000 | 17,000 | +4,000 |
| 1 to 3 years | 2.0 | 5,500 | 8,000 | -2,500 |
| 3 to 5 years | 4.0 | 4,000 | 5,500 | -1,500 |
| 5 to 10 years | 7.5 | 4,800 | 3,000 | +1,800 |
| Over 10 years | 12.5 | 900 | 400 | +500 |

The positive position up to one year reflects floating-rate loans and
short-dated liquidity assets; the negative positions from one to five
years reflect the behavioural maturity of core deposits; the positive
positions beyond five years reflect fixed-rate mortgages after the
pay-fixed hedges. Within the first year the net position of +4,000
reprices as +2,500 in months 0 to 3 (mid-point month 1.5), +1,000 in
months 3 to 6 (mid-point 4.5) and +500 in months 6 to 12 (mid-point 9).

## 8. EVE and NII results and supervisory outlier tests

<!-- Guidance: Report the six EVE shocks and the two NII shocks in the prescribed form, compare them with the thresholds and explain the drivers. Enter the values from the full calculation; the bucket arithmetic below only shows how to read them. -->

### 8.1 EVE under the six supervisory shocks

The bucket shocks below are illustrative values for the example only;
the real supervisory shocks are derived from the currency-specific
parameters and formulas in Delegated Regulation (EU) 2024/856.

| Shock *(Example)* | 0.5y | 2y | 4y | 7.5y | 12.5y | Change in EVE | % of Tier 1 |
|---|---|---|---|---|---|---|---|
| Parallel up | +200 bp | +200 bp | +200 bp | +200 bp | +200 bp | -215.0 | -6.32% |
| Parallel down (before lower bound) | -200 bp | -200 bp | -200 bp | -200 bp | -200 bp | +215.0 | +6.32% |
| Short rates up | +240 bp | +150 bp | +90 bp | +40 bp | +10 bp | +20.8 | +0.61% |
| Short rates down (before lower bound) | -240 bp | -150 bp | -90 bp | -40 bp | -10 bp | -20.8 | -0.61% |
| Steepener | -130 bp | -60 bp | 0 bp | +50 bp | +80 bp | -121.5 | -3.57% |
| Flattener | +160 bp | +80 bp | +20 bp | -30 bp | -50 bp | +91.8 | +2.70% |

Worked check for the parallel up shock, using the formula in section
4.1 and the positions in section 7: 4,000 x 0.5 x 2% = 40; -2,500 x 2
x 2% = -100; -1,500 x 4 x 2% = -120; 1,800 x 7.5 x 2% = 270; 500 x
12.5 x 2% = 125. The sum is 215, and with the minus sign the change in
EVE is -215.0, which is 6.32% of Tier 1 (215 / 3,400). The steepener
gives -(-26 + 30 + 0 + 67.5 + 50) = -121.5. In the full calculation the
parallel down and short down results are smaller than shown because the
post-shock lower bound limits how far rates fall.

### 8.2 NII under the parallel shocks

| Shock | Calculation *(Example)* | Change in 12-month NII | % of base NII | % of Tier 1 |
|---|---|---|---|---|
| Parallel up +200 bp | 2% x (2,500 x 10.5/12 + 1,000 x 7.5/12 + 500 x 3/12) = 2% x 2,937.5 | +58.75 | +5.6% | +1.73% |
| Parallel down -200 bp | Same with the sign reversed, before deposit-rate floors | -58.75 | -5.6% | -1.73% |

The gaps used here are after deposit pass-through (BA-03). In a
falling-rate scenario deposit rates close to zero cannot fall by the
full amount, so the full calculation shows a larger NII decline than
the linear approximation. For simplicity the summary in section 6 shows
the linear result rounded to -59; a real report enters the full
calculation and explains the difference.

### 8.3 Supervisory outlier test results

| Test | Result *(Example)* | Threshold | Outcome |
|---|---|---|---|
| EVE decline under any of the six shocks, % of Tier 1 | 6.32% (parallel up) | 15% under CRD Article 98(5) | Not an outlier |
| Large decline in NII under either parallel shock, % of Tier 1 | 1.73% (parallel down) | 5% of Tier 1 capital (Delegated Regulation (EU) 2024/856, one-year horizon, constant balance sheet; check the current text) | Not an outlier (1.73% against 5%) |

Being inside the outlier thresholds does not by itself mean the risk
is acceptable: the supervisor also considers the internal measures,
the quality of the assumptions and the trend. Record the margin to each
threshold and the shock size that would reach it, and explain any
quarter-on-quarter movement greater than [one] percentage point of
Tier 1. If an outlier threshold is breached, notify the competent
authority as required, present a remediation plan to ALCO within [ten]
business days, and expect supervisory measures that may include
reducing the exposure or using the standardised methodology.

## 9. Internal scenarios and CSRBB

<!-- Guidance: Report the internal scenarios that reflect the bank's own risk, including basis risk and the reverse scenario, and the CSRBB result. Explain how the results feed the ICAAP capital assessment. -->

| ID | Scenario *(Example)* | Change in EVE | Change in 12-month NII | Comment |
|---|---|---|---|---|
| IS-01 *(Example)* | Replay of the 2022 to 2023 hiking cycle on the current balance sheet | -180 | +40 | Deposit betas from BA-03 |
| IS-02 *(Example)* | Basis: benchmark rates -100 bp, deposit rates unchanged for 6 months | -10 | -45 | Margin squeeze on floating loans |
| IS-03 *(Example)* | Faster prepayments (12% a year) with parallel down -150 bp | +95 | -50 | Option risk reduces the EVE gain |
| IS-04 *(Example)* | Reverse: parallel shift that breaches the 12% EVE limit | -408 at about +380 bp | Not applicable | Approximation 408 / 215 x 200 bp, linear |

CSRBB is measured by revaluing the fair-valued and amortised-cost
securities portfolio under an internal spread widening of 50 bp for
government bonds and covered bonds (calibrated on a historical
one-year spread move), with spread durations from the
position system.

| Portfolio | Market value *(Example)* | Spread duration | Spread shock | Loss |
|---|---|---|---|---|
| Level 1 government bonds | 3,600 | 4.0 | +50 bp | -72 |
| Covered bonds | 600 | 3.0 | +50 bp | -9 |
| **Total** | **4,200** | | | **-81** |

The loss of 81 equals 2.38% of Tier 1 (81 / 3,400). Holdings match the liquidity buffer in the ILAAP Report (`finance/ilaap-report`); the Level 2B RMBS (200) are omitted from this simple illustration. A floating-rate coupon removes interest rate risk but not spread risk, so a real report includes them with a spread duration close to their weighted average life (at a weighted average life of about 4 years and the same +50 bp shock, this would add 200 x 4.0 x 0.50% = 4 of loss). The ICAAP Report
(`finance/icaap-report`) holds internal capital of EUR 300 million for
IRRBB (the worst supervisory EVE loss of 215 plus an add-on of 85 for
basis and option risk set by the ICAAP methodology, 215 + 85 = 300) and EUR 80 million for CSRBB (this
result, rounded), without diversification between risk types.

## 10. Model validation and data quality

<!-- Guidance: Report the validation status of the measurement engine and behavioural models, open findings and data quality checks. Supervisors under the revised SREP guidelines assess both the outcome and the quality of the internal system. -->

The measurement engine and behavioural models are in the model
inventory and are validated under the Model Risk Management Policy
(`finance/model-risk-management-policy`), with findings recorded in
Model Validation Report (`ai-data/model-validation-report`) format.
Data quality checks reconcile the IRRBB positions with the general
ledger each month, test completeness of contractual data (repricing
dates, floors, prepayment options) and track manual adjustments.

| ID | Item | Status *(Example)* | Owner | Due |
|---|---|---|---|---|
| VF-2026-03 *(Example)* | Prepayment model under-predicts prepayments in falling-rate periods | Open; overlay of +1.5 points on base rate applied | Head of ALM | 2027-03-31 |
| DQ-2026-07 *(Example)* | 0.8% of mortgage balances lack the contractual floor flag | Open; conservative default applied | Data office | 2027-01-31 |
| BM-2026-01 *(Example)* | Standardised methodology benchmark differs by 9% on parallel up | Explained by commercial margin treatment | Market risk | Closed |

## 11. Disclosure, actions and sign-off

<!-- Guidance: Link the report to the Pillar 3 IRRBB disclosure and to the regulatory reporting, list the actions agreed, and record the sign-off. -->

The Pillar 3 disclosure under CRR Article 448 reports the EVE and NII
changes under the supervisory shocks and the key modelling assumptions,
including the average and longest repricing maturity of non-maturity
deposits. Ensure that the figures in this report reconcile with the
disclosure and the supervisory reporting templates for the same date.

| Action ID | Action | Owner | Due | Status |
|---|---|---|---|---|
| A-IR-01 *(Example)* | Increase HP-01 pay-fixed swaps by EUR 300m to offset mortgage growth | Treasury | 2027-01-31 | Approved by ALCO 2027-01-14 |
| A-IR-02 *(Example)* | Re-estimate deposit betas with 2025 to 2026 data | ALM | 2027-06-30 | Open |
| A-IR-03 *(Example)* | Close VF-2026-03 | ALM and model validation | 2027-03-31 | Open |

| Sign-off | Name | Statement | Date |
|---|---|---|---|
| Head of ALM | [@name] | Measurements produced in line with the policy in force | YYYY-MM-DD |
| Second line | [@name] | Independent review completed; limits monitored | YYYY-MM-DD |
| ALCO chair | [@name] | Report noted; actions approved | YYYY-MM-DD |

## 12. Glossary and references

<!-- Guidance: Define the IRRBB terms used and list the versions of the rules relied on. -->

### 12.1 Glossary

| Term | Meaning in this document |
|---|---|
| IRRBB | Risk to economic value and earnings from interest rate changes affecting banking-book positions |
| CSRBB | Risk from changes in credit spread and liquidity components of banking-book instrument prices not explained by IRRBB or expected credit losses |
| EVE | Economic value of equity: present value of banking-book assets minus liabilities, excluding equity |
| NII | Net interest income: interest income minus interest expense over a horizon |
| Supervisory outlier test (SOT) | Prescribed EVE and NII shock tests whose thresholds trigger supervisory attention |
| Non-maturity deposit (NMD) | A deposit without a contractual maturity, such as a current account |
| Core deposit | The stable part of NMDs unlikely to reprice with market rates |
| Beta (pass-through) | The share of a market rate change passed to a deposit rate |
| PV01 | Change in present value for a one-basis-point rate move |
| Replicating portfolio | A set of fixed-rate tranches used to model the repricing of NMDs |

### 12.2 References

| Reference | Version or date checked | Use |
|---|---|---|
| Directive 2013/36/EU (CRD), Articles 84 and 98(5) | Check consolidated text | Legal basis |
| Commission Delegated Regulation (EU) 2024/856 | In force 2024; check the current text | Supervisory outlier tests |
| Commission Delegated Regulation (EU) 2024/857 | In force 2024; check the current text | Standardised methodologies |
| EBA/GL/2022/14, IRRBB and CSRBB guidelines | Applies from 2023-06-30 (CSRBB parts from 2023-12-31); check eba.europa.eu for amendments | Management expectations |
| EBA/GL/2026/06, revised SREP guidelines | Final report 2026-06-26, applies 2027-01-01 | Supervisory assessment |
| Regulation (EU) No 575/2013 (CRR), Article 448 | Check consolidated text | Disclosure |
| Basel Committee, "Interest rate risk in the banking book" (2016); "Recalibration of shocks for interest rate risk in the banking book" | 2024-07-16, implement by 2026-01-01 | Name and chapter IDs only |
| Related templates: ICAAP Report (`finance/icaap-report`), Contingency Funding Plan (`finance/contingency-funding-plan`), Recovery Plan (`finance/recovery-plan`), Stress Testing Programme (`finance/stress-testing-programme`) | Not applicable | Cross-references |

## Standard and licence note

Based on Directive 2013/36/EU, Commission Delegated Regulations (EU)
2024/856 and 2024/857, Regulation (EU) No 575/2013 and EBA guidelines
cited by number (EU texts reused with acknowledgement of the source).
The Basel Committee IRRBB standard and its 2024 recalibration are cited
by name and chapter ID only; no text, shock table or formula from them
is reproduced. The illustrative bucket shocks, methodology description,
limits and all wording are original to this template. Fernhollow Bank
and every figure are fictional and are not a calibration
recommendation. Check the current official texts and your national
requirements before use. Template licence: MIT.