In January 2024, the European Banking Authority (EBA) published a heatmap following its scrutiny of the implementation of the new Interest Rate Risk in the Banking Book (IRRBB) standards across European banks. The document did not introduce new regulatory requirements; instead, it provided a supervisory roadmap highlighting the main areas of focus after the first phase of implementation of the revised IRRBB framework.
Two years later, in January 2026, the EBA released an update to this heatmap, confirming the main risk areas and refining the supervisory priorities based on further monitoring and supervisory experience. Together, these publications illustrate how the EBA’s approach to IRRBB is evolving, particularly in a higher interest-rate environment and under the new regulatory framework.
This article will break down the key messages of the heatmap, explain its supervisory implications, and highlight the main insights for banks’ IRRBB management frameworks.
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The heatmap draws on the EBA’s analysis of industry practices, quantitative impact studies, supervisory discussions, and the changing rate environment. Its objective is to identify areas where banks’ approaches diverge, where risks are emerging, and where supervisory attention is likely to intensify.
A central message of the heatmap is the structural nature of Interest Rate Risk in the Banking Book (IRRBB). Unlike credit or market risk, IRRBB is not governed by a fixed, standardized capital requirement. Instead, it is a Pillar 2 risk that depends heavily on banks’ internal behavioral and valuation models. Because these models are not subject to prior supervisory approval, institutions with similar balance sheets can produce very different risk outcomes.
In practice, IRRBB has three defining characteristics:
It is assessed mainly through the supervisory review process (SREP);
It relies on internal behavioral assumptions, with deposit modeling having a particularly significant impact;
Modeling choices can lead to significant dispersion in results across banks.
This model dependence became more visible after the prolonged low-rate environment that preceded 2022. During that period, assumptions about deposit stability and repricing played a decisive role in IRRBB measurement. When interest rates rose sharply, these assumptions began to materially affect both economic value and short-term earnings sensitivity, turning IRRBB into a key supervisory priority.
The heatmap is closely linked to the 2022 IRRBB regulatory package, which implemented the revised Basel standards in the EU. This update introduced several important changes:
Updated EBA guidelines on IRRBB and credit spread risk in the banking book (CSRBB);
Regulatory technical standards for supervisory outlier tests (SOTs);
A standardized approach for IRRBB measurement;
Updated reporting and disclosure requirements.
Also, in 2024, one of the most significant innovations became operational with the introduction of the Supervisory Outlier Test based on Net Interest Income (NII). The EU’s IRRBB framework had traditionally focused on Economic Value of Equity (EVE) sensitivity, which captures long‑term value effects. The new NII metric complements this by measuring short‑term earnings sensitivity, adding a forward‑looking view of profitability under interest‑rate shocks
Key features of the NII outlier test include:
Focus on short-term profitability under rate shocks.
A threshold set at 5% of Tier 1 capital.
Use as a supervisory indicator, not an automatic trigger.
The EBA clarifies that breaching the threshold does not automatically lead to supervisory action; rather, it prompts further analysis and dialogue.
Together, the model-driven nature of IRRBB and the regulatory changes introduced in 2022 and 2024 explain the rationale behind the heatmap, which aims to identify areas of divergence and guide supervisory focus across the European banking sector.
The heatmap is based on an extensive review of industry practices, drawing on quantitative impact study data, bilateral supervisory meetings, industry roundtables, and exchanges with non-EU regulators. From this analysis, the EBA identified several important patterns, particularly in relation to earnings sensitivity and deposit modelling.
One of the most notable findings was the change in the distribution of supervisory outliers. While the number of institutions breaching the Economic Value of Equity (EVE) threshold remained broadly stable, NII outliers rose to 16 in 2023 following the sharp increase in interest rates, before declining to 11 in 2024.
In many banks, balance-sheet dynamics evolved asymmetrically:
Asset yields increased relatively quickly.
Deposit rates adjusted more slowly.
This repricing gap produced material short-term earnings sensitivity, which was captured by the newly introduced NII outlier test. As a result, supervisory attention is increasingly moving from a sole focus on long-term value sensitivity toward short-term earnings resilience.
At the same time, the EBA observed significant dispersion in how banks model non-maturity deposits (NMDs), which are a key driver of IRRBB results. Differences were identified across several dimensions:
The share of deposits classified as core versus non-core;
Behavioral maturity assumptions;
Pass-through rates from market rates to customer rates;
The extent of reliance on expert judgement.
In some cases, institutions assumed a very low proportion of non-core deposits or a full pass-through of rate increases to certain deposit products. These divergent assumptions were identified as a major source of inconsistency in IRRBB outcomes across the industry, reinforcing the EBA’s focus on deposit modelling as a central supervisory issue.
The EBA also identified certain implementation issues related to the new NII metric, particularly around the constant balance sheet assumption.
In some cases, institutions did not reprice non-core deposits appropriately or misapplied the constant balance sheet concept. Such practices could lead to overstated or understated earnings sensitivity and, in some scenarios, non-conservative results. This finding highlights the need for greater consistency in the application of the new NII methodology across banks.
The heatmap outlines the main areas where the EBA has identified supervisory attention and provides recommendations aimed at strengthening the consistency of IRRBB implementation. The document highlights areas where practices diverge and where supervisory assessment should be reinforced.
One area concerns the use of supervisory metrics and tools. The EBA refers to the role of supervisory outlier tests within the SREP framework and highlights the importance of complementary IRRBB indicators and stress-testing approaches. The emphasis is placed on ensuring a robust assessment of interest rate risk exposures, without relying solely on a single metric.
Non-maturity deposits are identified as a key area of supervisory attention. The EBA highlights significant dispersion in behavioral assumptions, pass-through rates, and the classification of core and non-core balances across institutions. Particular emphasis is placed on the treatment of non-core deposits, the application of the constant balance sheet assumption, and the modelling of NII projections.
On commercial margins, the EBA clarifies that, for the SOT on NII, institutions should generally apply a constant‑spread approach in line with Article 4(4) of Delegated Regulation (EU) 2024/856; NMDs are the notable exception, where margin behavior (e.g., pass‑through, compression/expansion) may be modelled consistently with internal IMS assumptions given their inherently behavioral nature. The Heatmap’s concern is therefore less about “isolating pure interest rate risk” for EVE (which, by design, excludes commercial margins) and more about ensuring comparability and soundness of NII SOT by avoiding unwarranted flexibility in margin treatment outside NMDs. These observations underline the importance of ensuring greater consistency and transparency in deposit modeling and in the separation of risk and commercial components within IRRBB measurement.
The heatmap also notes considerable diversity in hedging practices across institutions. Differences in hedging strategies, the use of natural hedges versus derivatives, and accounting treatments are highlighted as areas where supervisory assessment remains relevant. The document therefore stresses the need for coherent alignment between risk measurement, hedging approaches, and overall IRRBB management frameworks.
In parallel, the Heatmap also refers to IRRBB disclosures, highlighting the supervisory objective of strengthening consistency and transparency across institutions. The EBA underscores that improved comparability of practices and metrics is essential to support supervisory convergence. While the Heatmap itself does not introduce new reporting requirements, its emphasis aligns with the broader IRRBB framework, where harmonized reporting templates under the ITS on IRRBB reporting enhance the consistency of supervisory assessments.
The heatmap also points to two structural topics that will require continued supervisory attention:
1. The first is the five-year cap on the behavioral maturity of non-maturity deposits, whose impact and potential unintended consequences will be monitored.
2. The second concerns credit spread risk in the banking book (CSRBB).
The heatmap notes significant differences across institutions in how CSRBB is defined and applied, particularly regarding the scope of instruments included and the distinction between interest rate and credit spread components. Given the relative novelty of the framework and the heterogeneity of practices observed, the EBA highlights the need for greater consistency in its implementation as supervisory experience develops.
Although the heatmap does not introduce new rules, it carries clear supervisory implications. One of the most important is the strengthened emphasis on earnings‑based IRRBB metrics
The Supervisory Outlier Test (SOT) on Net Interest Income (NII) is a relatively recent addition, having come into force in 2024. Recent Heatmap insights show that while ΔEVE outliers have largely diminished, ΔNII outliers remain more prevalent, underscoring supervisors’ growing attention to short‑term earnings vulnerability under stress alongside the traditional focus on long‑term economic value sensitivity.
Deposit modelling emerges as the central structural issue in IRRBB. Differences in behavioral assumptions explain much of the dispersion in risk results across institutions, and banks should expect closer scrutiny of these models, including requests for justification, back-testing, and peer comparisons.
Supervisory reviews are also becoming broader in scope. Beyond the metrics themselves, supervisors are increasingly examining hedging strategies, balance-sheet structures, and business model responses to higher interest rates. At the same time, the introduction of new reporting standards will raise expectations around data quality, consistency, and disclosure practices.
IRRBB remains fundamentally model-driven, making model governance and validation central to supervision.
Deposit behavior is the main structural driver of risk and dispersion across banks.
Supervisory focus is strengthening emphasis on short-term earnings resilience alongside the traditional emphasis on economic value sensitivity. EVE has historically been the main regulatory metric, with its outlier test in place well before the introduction of the NII SOT. The sharp interest rate increases in 2022 also revealed asymmetric repricing between assets and deposits, which had a material impact on short-term earnings and was reflected in the rise of NII outliers.
Some elements of the framework, such as the five-year deposit cap and CSRBB scope, remain under review.
The EBA IRRBB heatmap is best understood as a supervisory roadmap following the implementation of the new framework. Rather than introducing new rules or setting out a detailed forward-looking action plan, it consolidates the EBA’s observations and recommendations in areas where practices diverge, and supervisory attention is warranted. In particular, the document highlights developments in NII outcomes in the higher-rate environment, dispersion in deposit behavioral modeling, and the importance of coherent approaches to hedging and disclosures.
Importantly, the publication distinguishes between general thematic recommendations and the formal “Next steps” outlined by the EBA. These next steps are limited to three areas:
Ongoing monitoring of institutions’ practices and Pillar 3 disclosures;
An assessment of whether the July 2024 Basel Committee shock‑scenario recalibration requires amendments to the RTS;
And continued contributions to the IASB’s Dynamic Risk Management (DRM) project.
While deposits, CSRBB, and hedging strategies are discussed extensively and accompanied by observations and recommendations.
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