The European Banking Authority (EBA) has published its second-phase report outlining the medium- to long‑term objectives of the Interest Rate Risk in the Banking Book (IRRBB) heatmap, including key recommendations for institutions and supervisors. The report completes the heatmap milestones launched after the scrutiny of the IRRBB standards and builds on the guidance reflected in the first-phase implementation report published in February 2025.
This second-phase report provides analytical findings and recommendations in four priority areas:
- Application of the 5-year cap on the repricing maturity of non-maturity deposits (NMD) – this continues to serve as a harmonising benchmark with limited impact observed so far. Institutions that seek a longer horizon should demonstrate, within their Internal Measurement System (IMS), how such treatment better reflects product characteristics or client behaviour, substantiate it with historical evidence and integrate it into hedging practice, in line with Q&A 2023_6807. Any approved deviation should be disclosed under Pillar 3.
- Commercial margin modelling – constant-spread modelling remains widely used across most products except for non-maturing deposits (NMD), due to their behavioural features.
- Credit Spread Risk in the Banking Book (CSRBB) perimeter – CSRBB should be included in banks' internal capital adequacy assessment processes if it is considered material and firms are advised to work towards consistency across both Economic Value of Equity and Net Interest Income unless strong, risk-based arguments justify divergence. Institutions should not limit the scope by accounting classification nor by the availability of market observations. No instruments can be excluded simply because the institution intends to hold them. Derivatives should not be excluded solely because they are subject to credit valuation adjustment (CVA) or counterparty credit risk treatments. Own issuances other than equity should be included when they are sensitive to market spreads.
- Hedging strategies – Interest Rate Swap (IRS) remains the main principal derivative instrument used to mitigate IRRBB exposures. The EBA recommends that hedge designation should align with product characteristics, economic-hedging frameworks must be well-governed, and effectiveness should be evidenced through regular back-testing and documentation.
The EBA will continue assessing the impact of the IRRBB regulatory package. It will also evaluate the effect of the Basel Committee's recalibrated July 2024 interest rate shock scenarios to determine whether updates to existing technical standards are needed.
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