The AMF considers interest rate risk as potentially having a significant impact on the profitability and solvency of a financial institution that engages in bank intermediation activities. It is therefore essential for each financial institution to be able to rely on a prudential framework for interest rate risk management in order to adhere to sound and prudent management practices.
The Interest Rate Risk Management Guideline sets out the AMF’s prudential expectations for interest rate risk management, specifically in regard to interest rate risk in the banking book (IRRBB). IRRBB refers to the current or prospective risk to an institution’s capital and earnings arising from adverse fluctuations in interest rates that affect the institution’s banking book positions.
This guideline draws mainly from best practices proposed by the Bank for International Settlements.
