Sensitivity of net interest margin

Consultancy and modelling services for calculating the new regulatory sensitivity indicators for the net interest income. Adjustment of asset and liability management (ALM) indicators and strategies to this regulatory constraint.

Interest-rate risk management

The addition of this restrictive dynamic metric has a direct impact on the management strategy: on the one hand, it leads to a shift in the static interest rate position and, on the other, it complicates interest-rate risk management (IRRBB), which is now subject to multiple and potentially conflicting constraints, and increases the model risk.

In this case, the consultancy service focuses on the quantitative analysis of the resulting sub-optimality in the interest-rate risk management strategy and on the operational adaptation of the strategy in order to reduce this sub-optimality and curb this additional complexity: in particular, design and control of risk metrics.

NII SOT

In October 2022, the European Banking Authority (EBA) published a methodology for calculating a new risk metric of loss of income (NII SOT: Supervisory Outlier Test on Net Interest Income) in the event of a change in interest rates, subject to a limit.

For banks, this means a considerable amount of dynamic modelling of volumes (at origination and in balance sheet) and customer rates, which not only adds to the burden of updating static models but also requires a much higher degree of econometric sophistication. Our long experience in this field enables us to support them: modelling and calculating the step response to an interest rate shock.