Interest rate sensitivity calculationInterest rate sensitivity calculation

Interest rate sensitivity calculation

Table 3 captures interest rate sensitivities across specified tenor buckets across six interest rate shock scenarios, aggregated across reported currencies.

The six prescribed interest rate shocks scenarios are defined in Basel Committee on Banking Supervision (BCBS) (2016) Interest Rate Risk in the Banking Book[4]. These include:

1. Parallel shock up;
2. Parallel shock down;
3. Steepener shock (short rates down and long rates up);
4. Flattener shock (short rates up and long rates down);
5. Short rate shock up; and
6. Short rate shock down.

For each Tenor bucket, the notional contractual repricing cash flows are aggregated using values from Table 1. This results in a single positive or negative net notional cash flow amount for each tenor bucket.

To derive a maturity ladder, notional cash flows are to be grouped into a series of tenor buckets (time bands) according to the occurrence of the contractual repricing cash flows. The tenor buckets and weighting factors are specified in the table below. [5]

Weighting factors (%) used in calculation of interest rate sensitivities in Table 3