The EBA has just quietly reshaped the IRRBB landscape in Europe – not with new rules, but with a clear roadmap for where supervisory expectations are heading over the medium to long term.
Why this IRRBB heatmap report matters
The new EBA Report on IRRBB heatmap implementation completes the medium and longterm milestones set out in the original 2024 IRRBB Heatmap, turning what started as a scrutiny exercise into a structured convergence agenda for banks and supervisors. It does not introduce new binding requirements, but it does send strong signals on what “good practice” in IRRBB and CSRBB should look like over the coming years.
For EU banks, that makes this publication less a technical curiosity and more a strategic guide: it crystallises how supervisors expect IRRBB to be measured, steered, hedged and disclosed in a postrateshock world.
Five themes risk teams should focus on
The Report structures its analysis and recommendations around five key areas that will define IRRBB conversations going forward.
- Supervisory Outlier Tests (SOT)
SOT results show that banks have materially reduced outliers on both ΔEVE and ΔNII since 2021, reflecting adaptation of hedging and behavioural assumptions to the new rate environment. The asymmetry remains: ΔEVE outliers are now rare, while ΔNII is still more sensitive to downward rate scenarios, with a small cluster of institutions carrying significant earnings risk under parallel down shocks.
- 5year cap on nonmaturity deposits (NMDs)
The behavioural cap that limits NMD repricing maturity to five years is confirmed as the supervisory default and is explicitly framed as a harmonising benchmark rather than a blunt constraint. QIS evidence suggests that, in the current rate environment, most banks’ internal profiles already fall within five years, so the cap mainly prevents overly optimistic tail assumptions and supports comparability across institutions.
- Commercial margin modelling
Article 4(4) of Delegated Regulation (EU) 2024/856 requires a constant spread in the SOT on NII, and the Report confirms this is how term deposits, fixedrate loans and most floatingrate products are typically modelled. Nonmaturity deposits remain the exception: their margins are inherently behavioural (passthrough lags, margin compression/expansion), which justifies scenariosensitive treatment aligned to internal IMS assumptions – but the EBA is explicit that this flexibility should not be generalised to all products.
- CSRBB perimeter
The perimeter for Credit Spread Risk in the Banking Book is still highly heterogeneous, with many institutions restricting CSRBB to fairvalue instruments and leaving amortisedcost books largely outside formal spread risk measurement. The EBA encourages a common perimeter for EVE and NII, inclusion of both fairvalue (IFRS 13 Levels 1–3) and materially spreadsensitive amortisedcost positions, and rejects exclusions based solely on accounting classification, holding intent, or the presence of CVA.
- Hedging strategies
Interest rate swaps remain the dominant hedging instrument, with microhedging used for securities and own issuances and macrohedging for behavioural portfolios such as NMDs. Going forward, supervisors will expect alignment between hedge designation and product characteristics, explicit consideration of both value and earnings metrics, and robust governance backed by regular backtesting and documentation of hedge effectiveness.
What changes for banks in practice?
Several practical implications stand out for risk, treasury and ALM teams:
- Modelling assumptions that were “acceptable” preratesshock will face tougher scrutiny, especially around NMD stability, commercial margins and CSRBB coverage.
- Institutions using repricing horizons beyond five years for deposits will be expected to show strong behavioural evidence, link these assumptions to hedging and ICAAP, and provide transparent Pillar 3 disclosures where supervisors have approved deviations.
- CSRBB can no longer be treated as a niche, fairvalueonly concept: amortisedcost instruments with material spread sensitivity should be captured via proxies or models, and own liabilities (other than equity) are explicitly in scope when they are spreadsensitive.
- Pillar 3 will become an even more important channel for benchmarking: the EBA intends to keep analysing IRRBB and CSRBB disclosures to push convergence and transparency across the EU.
In other words, the message is that IRRBB and CSRBB are now fully mainstream prudential risks: banks are expected to treat them as core components of risk appetite, capital planning, product pricing and hedge design.
How CROs, ALCOs and Boards can respond
For senior management and Boards, this is a timely opportunity to step back and assess whether IRRBB frameworks are really aligned with the direction of travel set out by the EBA. A practical response might include:
- Commissioning a focused gap analysis against the Report’s recommendations across SOT performance, NMD modelling, margin assumptions, CSRBB perimeter and hedging governance.
- Reviewing ICAAP treatment of IRRBB and CSRBB to ensure material risks are captured, methodologies are technically robust, and narratives are consistent with supervisory expectations and Pillar 3 disclosures.
- Stresstesting the resilience of both ΔEVE and ΔNII under the recalibrated Basel IRRBB shocks, ahead of any potential revisions to EU technical standards.
Used this way, the IRRBB Heatmap becomes not a compliance exercise, but a tool for strengthening balance sheet resilience, improving supervisory dialogue, and aligning risk measurement with real-world behaviour.