Regulatory Alerts2025-10-30
Update of the Standardised Interest Rate Shock Scenarios
The Saudi Central Bank (SAMA) mandates the adoption of updated standardised interest rate shock scenarios for Interest Rate Risk in Banking Book (IRRBB) management, effective 1 January 2026. This circular aligns domestic regulations with Basel Committee guidelines by specifying six prescribed shock scenarios—parallel up/down, steepener, flattener, and short rate movements—and defines precise mathematical parameterisations for parallel, short, long, and rotation shocks across 21 currencies. Banks must apply these currency-specific absolute shocks to capture parallel and non-parallel gap risks for Economic Value of Equity (EVE) and Net Interest Income (NII), utilizing a standardized 19-bucket yield curve model with a fixed decay parameter of x=4.