Global banks hit back at regulators' "dangerous" plans to tackle interest-rate risk in loan books as markets brace for the U.S. Federal Reserve to raise borrowing costs as early as this week.
The Basel Committee on Banking Supervision has proposed overhauling its rules on interest-rate risk in banking books, including possible binding standards on how banks should measure their resilience to shock changes in benchmark borrowing costs. The draft pertains to customer loans and other assets that lenders expect to hold for long periods, or to maturity, and whose current value can vary when rates change.
A standardized model for the "regulatory capital treatment of interest rate risks in the banking book is neither possible nor necessary," the German Banking Industry Committee said in its response to the Basel group. "Quite the contrary: To our point of view, a regulatory standard approach is even dangerous."
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