Regulatory Alerts2025-02-12
Added · Updated
Good Practices on Using Behavioural Models for Measuring Interest Rate Risk in the Banking Book
The Hong Kong Monetary Authority issued this annex to establish good practices for authorized institutions using behavioural models to measure interest rate risk in the banking book, following lessons from the 2023 US and European banking turmoil. The document mandates robust model governance, granular non-maturity deposit segmentation, and the incorporation of forward-looking elements to ensure accurate risk measurement. It further requires regular performance monitoring, independent validation, and jurisdiction-specific calibration of third-party or group-level models to maintain reliability and support strategic decision-making.
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