Circular CSSF 24/848 is a CSSF circular, published 29 December 2023 and updated 5 January 2024. Subject: Application of the Guidelines of the European Banking Authority on the criteria for the identification, evaluation, management and mitigation of the risks arising from potential changes in interest rates and of the assessment and monitoring of credit spread risk, of institutions’ non-trading book activities (EBA/GL/2022/14).
\nLegal basis: Law of 5 April 1993 on the financial sector.
\nRelevant for: Credit institutions, Investment firms.
\nKeywords: Internal governance, Market risk, Risk management, Stress test.
\nCircular CSSF 24/848 Application of the Guidelines of the European Banking Authority on the criteria for the identification, evaluation, management and mitigation of the risks arising from potential changes in interest rates and of the assessment and monitoring of credit spread risk, of institutions’ nontrading book activities (EBA/GL/2022/14)
\nCircular CSSF 24/848 Application of the Guidelines of the European Banking Authority on the criteria for the identification, evaluation, management and mitigation of the risks arising from potential changes in interest rates and of the assessment and monitoring of credit spread risk, of institutions’ non-trading book activities (EBA/GL/2022/14) To all credit institutions designated as Less Significant Institutions under the Single Supervisory Mechanism and CRR investment firms incorporated under Luxembourg law and to the Luxembourg branches of credit institutions and CRR investment firms having their registered office in a third country
\nLuxembourg, 29 December 2023 Ladies and Gentlemen, The purpose of this circular is to inform you that the CSSF, in its capacity as competent authority, applies the Guidelines of the EBA specifying criteria for the identification, evaluation, management and mitigation of the risks arising from potential changes in interest rates and of the assessment and monitoring of credit spread risk, of institutions’ non-trading book activities (EBA/GL/2022/14) (the “Guidelines”). Consequently, the CSSF has integrated the Guidelines into its administrative practice and regulatory approach with a view to promoting supervisory convergence in this field at the European level. The Guidelines specify the criteria that institutions and competent authorities should apply in view of the sound and prudent management of interest rate risk for non-trading book activities (“IRRBB”) and credit spread risk for non-trading book activities (“CSRBB”) further to Article 53-20 of the Law of 5 April 1993 on the financial sector (“LFS”). The CSSF, in its capacity as competent authority, has notified to the EBA its intention to apply the Guidelines.
\nInterest income, interest expenses and market value changes should be considered for the measurement of IRRBB and CSRBB under internal systems to ensure a comprehensive assessment of the impact of all interest-rate and credit-spread-sensitive items;
\nMore
\nprudent
\nbehavioural
\nassumptions
\nnon-maturity
\ndeposits
\nfrom
\nnon-financial
\ncounterparties, and introducing a five-year cap on weighted average repricing maturity for certain retail and wholesale non-maturity deposits; •
\nMinimum criteria that will be assessed by the CSSF to determine whether an institution’s IRRBB internal systems are satisfactory. If internal systems are found to be non-satisfactory, the CSSF
\nmay require an institution to use the standardised approach as envisaged in Article 53-20(3) of the LFS. •
\nFurther details on the definition of CSRBB, which shall include assets recognised at fair value, but also any other assets, liabilities or off-balance sheet items that can be exposed to CSRBB. The Guidelines also provide further details on the expected assessment and monitoring of CSRBB, adequate and proportionate governance arrangements on CSRBB and processes to identify, manage, monitor and report CSRBB as well as related internal control mechanisms.
\nThe reference to EBA/GL/2018/02 in Part III, Chapter 8, sub-chapter 8.1, paragraph 47 of Circular CSSF 12/552 shall now be read as follows: “When implementing Article 53-20 (Interest rate risk arising from non-trading book activities) of the LFS, the institutions shall comply with EBA/GL/2022/14”.
\nThe text above is the opening of the document; the PDF carries the whole.
\nDocument page, PDF. Source: Commission de Surveillance du Secteur Financier (CSSF), reproduced with the CSSF's consent. The French text prevails.
"}