Document ID: chunk:federal_register_of_legislation:F2012L02334:body:0:p8
Version: federal_register_of_legislation:F2012L02334
Segment Type: other
Provision Reference: 
Character Range: 18916–22002

approval must meet the quantitative standards for measuring the capital requirement for IRRBB as detailed in Attachment B.

Attachment A

Governance and the interest rate risk in the banking book management framework

Responsibilities of the Board of directors and senior management

     1. An ADI's Board is responsible for the overall IRRBB profile of the ADI and its IRRBB management framework. Accordingly, the Board must make clear its appetite for this risk, including IRRBB exposure limits. The Board or a Board committee must be actively involved in the oversight of the ADI's approach to managing and measuring IRRBB.
     2. An ADI's IRRBB management framework must be approved by the Board, or a Board committee. In the latter case, the committee must have clearly defined responsibilities, thresholds for reporting to the Board and performance obligations. The approved framework must clearly articulate respective responsibilities and reporting relationships.
     3. To ensure the continued effectiveness of the IRRBB management framework, the Board, or Board committee, must ensure the framework is subject to periodic validation and review (refer to paragraphs 18 and 19 of this Attachment) by a suitable independent party.
     4. An ADI's Board, or Board committee, must review IRRBB management reports (refer to paragraphs 13 to 15 of this Attachment) on a regular basis and satisfy itself that this risk is appropriately managed.
     5. Senior management must have a thorough understanding of the ADI's IRRBB management framework (to the extent that it relates to risk areas within their responsibilities), be actively involved in its implementation and ensure its effective operation over time. To facilitate this, the ADI must have in place an executive committee, with appropriate representation from across the ADI, which focuses on the management and measurement of IRRBB. The executive committee must hold regular meetings to discuss matters including the performance of the framework, areas requiring improvement and the status of efforts to address previously identified deficiencies.
     6. The ADI must have an independent IRRBB management function that complies with the requirements in this Attachment. This function must have a suitable independent reporting line, providing access to the executive committee referred to in paragraph 5 of this Attachment.
     7. Senior management must, in conjunction with the IRRBB management function referred to in paragraph 6 of this Attachment, develop appropriate policies relating to the risk management framework. Management is responsible for translating these policies into specific procedures and processes to facilitate implementation and verification within the ADI's business operations. Senior management must provide notice to the Board, or Board committee, of material changes or exceptions from established policies that could have an impact on the operation of the IRRBB management framework, including the IRRBB capital requirement.

Sufficient resources

    8.             An ADI must have