Interest rate risk
Bank runs prompt rethink of IRRBB deposit models
ALM managers are looking for ways to separate the impact of rate hikes from idiosyncratic risks
Banks in crisis
The peak of the global financial crisis arrived in 2008 with the collapse of Bear Stearns and Lehman Brothers, and a raft of bailouts. However, it had already been rumbling on for a year at that point, blowing holes in bank funding models and capital…
Initial margin requirements for IR swaps hit record $325bn
CME, Eurex and LCH report aggregate 10% rise in month marred by most severe crisis since 2008
Kneejerk regulatory reaction to SVB risks lending squeeze
Risk manager at regional bank says any Dodd-Frank 2.0 would be ‘fighting the last war’
As rates rose, KeyBank unwound 94% of pay-fixed swaps
Sale of AFS hedges left book exposed throughout late 2022, much as at ill-fated SVB
SEC securitisation rule could hamper interest rate hedging
ABS participants say breadth of resurrected 2011 proposal creates compliance minefield
Why US bank regulation needs a system upgrade
SVB collapse shows supervisory framework is not fit for a changing industry and new systemic risks
Did US hedge accounting rules contribute to SVB’s recklessness?
Hedging and directional risk-taking was a problem, but FASB regime may have complicated matters
Five regional banks predict lower income from higher rates
IRRBB simulations show lending revenue shrinking as Fed policy gets tighter
SVB opens floodgates on liquidity buffers debate
European regulator says HQLAs should be booked at fair value, but not everyone agrees
CaixaBank, UniCredit most exposed to rate increases in Europe
Banks report largest hits in IRRBB tests, but remain clear of fail threshold
Like SVB, five other US lenders saw negative NII growth in 2022
Ally, Customers, First Foundation, Morgan Stanley and PacWest were pressured by rising rates
Ahead of collapse, SVB’s interest expense climbed 1,700%
Lending income failed to keep pace with higher deposit costs as Fed reshaped rates environment
BMO, TD and US Bancorp hit by out-of-the-money goodwill hedges
Derivatives meant to offset dilution of capital in acquisitions turned loss-making as yields temporarily slumped
Why risk managers don’t trust the EU’s new IRRBB test
And why there may never be a perfect way of assessing the risks of changes in net interest income
CBA’s IRRBB charges finally ease
After over a year of surging charges for interest rate risk, last quarter of 2022 brought reprieve
EU snub to clearing carve-out hurts optimisation efforts
Forcing firms to clear risk-reducing trades would squeeze collateral and potentially hike liquidity risk, dealers warn
ECB promises ‘proportionate’ approach to interest rate risk
But banks still fear regulatory and investor response if many are classed as outliers
All outliers now: Europe’s unflattering IRRBB test
Banks, fearing overreaction from supervisors, urge European Commission to reject NII-based assessment
More EU banks will fail new IRRBB test as rates push upwards
Half of all EU banks could cross outlier threshold for new test of net interest income
RBI’s VAR gauges hit new record
Banking and trading book risk rose in Q3 amid shifts in risk factor mix
Crédit Agricole VAR hits highest since 2010
Trading risk gauge rose as high as €27 million during Q3
Singapore’s UOB bucks trend to seek FRTB model approval
Despite data challenges, bank is opting for IMA to enhance risk management
As interest rates surge, bankers fret over last year’s models
IRRBB modellers trying to predict client behaviour have little relevant data to fall back on