Book a Demo
#Interest Rate Risk
#Regulation
Interest rate risk in the banking book comes wrapped in four jurisdictions' worth of acronyms, and half the difficulty of reading a regulation, a disclosure or an ICAAP is simply decoding them. This IRRBB glossary defines the 40+ terms you will actually meet, from ALCO to ΔEVE, alphabetically, in one table. Where a term has its own article, the entry links to it.
The IRRBB glossary, A to Z
| Term | Meaning |
|---|---|
| ALCO | Asset and Liability Committee, the senior committee that owns balance-sheet risk decisions |
| ALM | Asset and Liability Management, the function managing structural balance-sheet risks |
| AOCI | Accumulated Other Comprehensive Income, the equity account holding unrealized gains and losses on FVOCI/AFS securities; whether it counts in CET1 is the key US capital question. See AOCI opt-out explained. |
| AFS / HTM | Available for Sale / Held to Maturity, the US securities classifications; AFS marks to fair value through AOCI, HTM stays at amortized cost |
| Automatic optionality | Embedded options exercised mechanically when in the money, such as caps, floors and calls |
| Basis risk | The risk from instruments repricing at the same time off reference rates that do not move in lockstep |
| BCBS 368 / d368 | The Basel Committee's April 2016 IRRBB standard |
| Behavioral optionality | Customer options exercised imperfectly, such as prepayment, NMD withdrawal and early redemption |
| CAMELS | The US supervisory rating system; its "S" (Sensitivity to market risk) component carries interest rate risk |
| CCAR / DFAST | The US capital planning and stress testing regimes |
| CET1 / Tier 1 | Common Equity Tier 1 and Tier 1 capital; the outlier tests use Tier 1 as their denominator |
| Constant balance sheet | The NII convention under which maturing positions are replaced like for like |
| Core deposits | The stable, rate-insensitive fraction of NMDs treated as long-term funding |
| CPR | Conditional Prepayment Rate, the annualized speed at which borrowers prepay fixed-rate loans |
| CSRBB | Credit Spread Risk in the Banking Book, the risk from market-wide credit and liquidity spread moves, distinct from both IRRBB and credit risk |
| C-SREP / PSM | Capital SREP / Periodic Summary Meeting, the PRA's supervisory assessment cycle and the point at which its outcome is communicated |
| d578 | The July 2024 Basel recalibration of the IRRBB shock scenarios, in force 1 January 2026. See the IRRBB outlook for 2026-2028. |
| Deposit beta / pass-through | The fraction of a market rate move that a bank passes on to its deposit rates. See what the data says on deposit assumptions. |
| Duration of equity | A summary of the net duration mismatch; when positive, equity value falls as rates rise |
| EaR | Earnings at Risk, a scenario or distributional generalization of ΔNII |
| EVE / ΔEVE | Economic Value of Equity, the present value of banking book cash flows on a run-off basis; ΔEVE, its change under rate scenarios, is the core value metric. See EVE vs NII explained. |
| FSA017 | The UK interest rate gap report (repricing gap by bucket and currency), feeding the PRA's Pillar 2A assessment |
| FTP | Funds Transfer Pricing, the internal mechanism that concentrates rate risk in Treasury. See margin management and FTP. |
| Gap risk | The risk from repricing-timing mismatches, with a parallel and a yield-curve component |
| GL / RTS / ITS | The EBA's instruments: Guidelines, plus Regulatory and Implementing Technical Standards, which become Level 2 law |
| HQLA | High-Quality Liquid Assets under the LCR; their interaction with IRRBB is a post-2023 workstream |
| ICAA Part | The Internal Capital Adequacy Assessment Part of the PRA Rulebook; its Chapter 9 holds the UK's binding IRRBB rules |
| ICAAP | Internal Capital Adequacy Assessment Process, where banks self-assess the capital held against IRRBB |
| IRRBB | Interest Rate Risk in the Banking Book. See SVB's IRRBB anatomy. |
| J-templates | The EU's dedicated supervisory reporting templates for IRRBB (J 01.00 to J 08.00). See EBA CP/2026/07 and IRRBB reporting. |
How to Build an IRRBB Framework That Holds Up Under Scrutiny
EVE and NII, the six shock scenarios, CSRBB and supervisory outlier tests across Basel, the EU, the UK and the US: a complete reference for treasury, ALM and risk teams.
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| Term | Meaning |
|---|---|
| KAO | The automatic option risk add-on in the standardized framework |
| LFI | The Federal Reserve's Large Financial Institution rating system for banks above $100bn |
| NEV | Net Economic Value, the NCUA's standardized supervisory test for US credit unions |
| NII / ΔNII | Net Interest Income; ΔNII, its change under rate scenarios, is the core earnings metric. See how to project NII under IRRBB. |
| NMD | Non-Maturity Deposit, a deposit with no contractual maturity and the central behavioral modeling problem in IRRBB. See Non-Maturity Deposits Explained. |
| Outlier test / SOT | Supervisory (Outlier) Test, the threshold tests flagging excessive IRRBB: EVE above 15% of Tier 1 (Basel and EU), NII above 5% of Tier 1 (EU). See the EVE supervisory outlier test. |
| P2R / P2G | Pillar 2 Requirement (binding) and Pillar 2 Guidance (expected), the EU's SREP capital outcomes |
| Pillar 2A / PRA buffer | The UK's firm-specific capital requirement, with IRRBB a named component set per SoP5/15; the PRA buffer sits above it, set from stress-test results |
| Pipeline risk | Optionality written before positions reach the balance sheet, such as rate locks and loan commitments |
| Run-off balance sheet | The EVE convention under which positions amortize and are not replaced |
| SDDT | Small Domestic Deposit Taker, the UK's Strong and Simple category; the capital process is simplified but the IRRBB substance is unchanged |
| SNCI | Small and Non-Complex Institution, the EU category qualifying for simplified approaches and reporting |
| SREP | Supervisory Review and Evaluation Process, the EU's Pillar 2 assessment |
| SRP31 / SRP98 / DIS70 | The Basel Framework chapters holding the IRRBB standard, its application guidance and the disclosure requirements |
| SS / SoP | PRA Supervisory Statement / Statement of Policy; SS31/15 (ICAAP and SREP expectations) and SoP5/15 (Pillar 2 methodologies) carry the UK's IRRBB detail |
| SSM | Single Supervisory Mechanism, the ECB together with the national competent authorities |
| Tailoring categories | The US Category I-IV framework calibrating prudential requirements by size and complexity |
One risk, several vocabularies
A closing warning for cross-border readers: the same concepts travel under different names. The Basel and EU world says IRRBB; US guidance says simply IRR, interest rate risk, because the 1996-vintage framework predates the banking book label.
The mechanism that flags excessive risk answers to three names depending on where you sit:
- the EU's supervisory outlier test (SOT), a fully prescribed calculation with EVE and NII thresholds in law;
- the Basel and UK outlier test, the 15% of Tier 1 trigger for supervisory attention;
- the UK's Pillar 2A add-on, which goes one step further and converts the assessment into a routine, firm-specific capital charge.
Same risk, three regulatory dialects. This glossary should let you read all of them.
For the complete picture, from EVE and NII sensitivities and the six supervisory shock scenarios to outlier tests and how Basel, the EU, the UK and the US differ, see Mirai RiskTech's guide IRRBB regulation across Basel, the EU, the UK and the US: a complete reference.
