Economic value of equity (EVE)
Seven banks under SEC scrutiny over interest rate risk disclosures
Regulator-issued letters aim at boosting transparency on EVE and NII sensitivity
Review of 2023: A hard road to a soft landing
Banks and regulators were caught in the crosswinds of the fight against inflation
Commerzbank’s rate-shock loss sensitivity rises 33%
Bank’s liabilities modelled to reprice faster than assets in a 200bp parallel hike scenario
EC to adopt NII outlier test within ‘weeks’
New IRRBB rules could come into force in early 2024; industry hoping EBA draft is softened
Filling the gaps in Basel’s interest rate risk measures
Reverse stress-testing or VAR may work better than existing outlier tests, but are hard to manage
Zions model change reverses positive EVE projections
Estimated impact of interest rate shocks up to 17.7pp higher under adjusted assumptions
Regulators’ remorse: SVB and the case for IRRBB capital charges
Basel Committee chair among those who say Pillar 1 capital requirement could have helped control SVB risks
Basel’s IRRBB shock scenario update hit by US crisis
Recalibration of shocks had been touted for Q3, but wider rethink may now cause delay
Western Alliance’s rate-risk gauge breaches internal guidance
EVE depletion for 100bp and 200bp hike scenarios highest disclosed by any US regional bank
Hear no EVE, see no EVE
The Fed chastised SVB for poor rate-risk monitoring, but most US banks’ disclosures remain focused on earnings alone
US regionals remain laggards on EVE measure
Majority of lenders in Q1 did not report key metric that could have detected SVB’s risks
CaixaBank, UniCredit most exposed to rate increases in Europe
Banks report largest hits in IRRBB tests, but remain clear of fail threshold
Missing Basel metric could have revealed SVB risks
US regulators did not implement economic value of equity test that SVB failed badly in 2021
ECB promises ‘proportionate’ approach to interest rate risk
But banks still fear regulatory and investor response if many are classed as outliers
Regulator to ‘reflect’ on IRRBB shocks after rates leap
Once considered too harsh by banks, stress scenarios may even prove too generous
SocGen, ING most exposed to rate shocks among EU banks
Banks’ economic value of equity would shrink under higher rates scenarios