Global banking regulators are making changes to how the capital rules for global banks deal with interest rate shocks in unusual rate environments.
The Basel Committee on Banking Supervision announced revisions to the treatment of interest rate shocks and the methodology used for calculating shocks set out in the standards on interest rate risk in the banking book.
The changes are being adopted to accommodate the possibility of a near-zero interest rate environment, which has arisen during major market stress events such as the onset of the pandemic and the global financial crisis.
Regulators’ revisions aim to address how the methodology captures interest rate changes during periods when rates are close to zero.
Separate work is ongoing to review the rules’ treatment of interest rate risk in a more recent episode of financial market stress: the turmoil that arose in March 2023 as several U.S. banks failed amid liquidity concerns.
The revisions to the standards for dealing with rate shocks in near-zero rate environments are to be implemented by Jan. 1, 2026, the committee said.