ALMIS SIRS and the PRA Standardised Framework for IRRBB

This week, ALMIS International held a webinar on the Prudential Regulation Authority’s (PRA) Interest Rate Risk Standardised Framework. PRA is one of the successors to the Financial Services Authority and falls under the auspices of the Bank of England. The PRA Rulebook now states that a firm may elect to implement a standardised framework and our webinar set out to examine the impact of this.

The webinar was attended by around 60 of ALMIS Internationals UK banks and building society clients, during which we examined the concepts behind the standardised framework and how this contrasts with ALMIS software own models for calculating the BASIL 3 interest rate sensitivities.

Interest rate risk in the banking book has developed significantly following BASIL 3 reforms and now includes EVE (Economic Value of Equity) and Earnings Sensitivity Measures.

The majority in attendance felt they would continue instead with our ALMIS software calculation method which is inherently more accurate as it uses more granular cash-flow periods.

However, some attending the webinar said they would prefer the new PRA regulatory metric which ALMIS now supports using a dedicated report writer template. This integrates direct feeds from ALMIS calculated cashflows and yield curves.

Moreover, we welcome the new standardised framework and wish to support this as well as the more accurate calculations supported in ALMIS software.

ALMIS central function is to support decision making around interest rate risk hedging and to combine this with the UK’s regulatory framework and reports.

We are organising a full day masterclass on IRRBB using ALMIS software to assist clients on 25 th May, and the ALMIS User Group meeting on the following day we will discuss this subject further.

If you are interested in any element of financial regulatory reporting, then please get in touch via LinkedIn.

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