Prudential Regulation Authority Rulebook

1.

Institutions shall disclose the following quantitative and qualitative information on the risks arising from potential changes in interest rates that affect both the economic value of equity and the net interest income of their non-trading book activities referred to in in Chapter 9 of the Internal Capital Adequacy Assessment (ICAA) Part of the PRA Rulebook:

1. (a) the changes in the economic value of equity calculated under the following six supervisory shock scenarios referred to in Rule 9.7 of the ICAA Part of the PRA Rulebook for the current and previous disclosure periods:
1. (i) parallel shock up;
2. (ii) parallel shock down;
3. (iii) steepener shock (short rates down and long rates up);
4. (iv) flattener shock (short rates up and long rates down);
5. (v) short rates shock up;
6. (vi) short rates shock down;
2. (b) the changes in the net interest income calculated under the following two supervisory shock scenarios referred to in Rule 9.7 of the ICAA Part of the PRA Rulebook for the current and previous disclosure periods:
3. (i) parallel shock up;
4. (ii) parallel shock down;
5. (c) a description of key modelling and parametric assumptions used to calculate changes in the economic value of equity and in the net interest income required under points (a) and (b) of this paragraph;
6. (d) an explanation of the significance of the risk measures disclosed under points (a) and (b) of this paragraph and of any significant variations of those risk measures since the previous disclosure reference date;
7. (e) the description of how institutions define, measure, mitigate and control the interest rate risk of their non-trading book activities for the purposes of the competent authorities' review in accordance with Chapter 9 of the ICAA Part of the PRA Rulebook, including:
1. (i) a description of the specific risk measures that the institutions use to evaluate changes in their economic value of equity and in their net interest income;
2. (ii) a description of the key modelling and parametric assumptions used in the institutions' internal measurement systems for the purpose of calculating changes in the economic value of equity and in net interest income, as required under points (a) and (b) of this paragraph, if those assumptions differ from those used for the purposes of Chapter 9 of the ICAA Part of the PRA Rulebook or from those specified in Annex XXXVIII of Chapter 6 of this Disclosure (CRR) Part of the PRA Rulebook, including the rationale for those differences;
3. (iii) a description of the interest rate shock scenarios that institutions use to estimate the interest rate risk;
4. (iv) the recognition of the effect of hedges against those interest rate risks, including internal hedges that meet the requirements laid down in Article 106(3);
5. (v) an outline of how often the evaluation of the interest rate risk occurs;
8. (f) the description of the overall risk management and mitigation strategies for those risks;
9. (g) average and longest repricing maturity assigned to non-maturing deposits.

2.

By way of derogation from paragraph 1 of this Article, the requirements set out in points (c) and (e)(i) to (e)(iv) of paragraph 1 of this Article for descriptions relating to economic value of equity shall not apply to institutions that use the standardised framework referred to in Rule 9.1B of the ICAA Part of the PRA Rulebook.

[Note: This rule corresponds to Article 448 of the CRR as it applied immediately before revocation by the Treasury.]