Part

Internal Capital Adequacy Assessment

Chapter

Interest Risk Arising from Non-Trading Book Activities

Printed on: 06/11/2024

Rulebook at: 30/03/2018

9

Interest Risk Arising from Non-Trading Book Activities

9.1

A firm must implement systems to identify, evaluate and manage the risk arising from potential changes in interest rates that affect a firm’s non-trading activities.

[Note: Art 84 of the CRD]

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9.2

As part of its obligations under the overall Pillar 2 rule in 3.1, a firm must carry out an evaluation of its exposure to the interest rate risk arising from its non-trading activities.
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9.3

The evaluation under 9.2 must cover the effect of a sudden and unexpected change in interest rates of 200 basis points in both directions.
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9.4

A firm must immediately notify the PRA if any evaluation under this rule suggests that, as a result of the change in interest rates described in 9.3, the economic value of the firm would decline by more than 20% of its own funds.

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9.5

A firm must carry out the evaluation under 9.2 as frequently as necessary for it to be reasonably satisfied that it has at all times a sufficient understanding of the degree to which it is exposed to the risks referred to in 9.2 and the nature of that exposure. In any case it must carry out those evaluations no less frequently than once a year.

[Note: Art 98(5) of the CRD]

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