Independent review of the interest rate Independent review of the interest rate risk in the banking book management framework and measurement system

Independent review of the interest rate risk in the banking book management framework and measurement system

1. An ADI’s IRRBB management framework (including the IRRBB measurement system) must be subject to effective and comprehensive independent review both initially (that is, at the time the model approval is sought) and then on an ongoing basis, to ensure the continued integrity of the framework. Such reviews must be conducted by functionally independent, appropriately trained and competent personnel, must cover both the activities of relevant business units and of the IRRBB management function and must take place at least once every three years or when a material change is made to the framework.
2. For the purpose of paragraph 18 of this Attachment, ‘functionally independent’ means that:
   1. the party or parties conducting the reviews do not contribute to the ADI’s IRRBB profile through the origination or alteration of risk; and
   2. the party or parties conducting the reviews must not be involved in the development, implementation or operation of the IRRBB measurement system, or be part of, or report to the risk management function referred to in paragraph 6 of this Attachment.

It is not necessary that the same party undertake all aspects of the review[6].