Credit Spread Risk in Banking Book (CSRBB Management)

This programme provides comprehensive coverage of Credit Spread Risk in Banking Book (CSRBB) management, addressing the EBA guidelines and practical implementation challenges for SME banks. Participants will understand the distinction between idiosyncratic credit risk and market credit spread risk, develop measurement frameworks for both Economic Value of Equity (EVE) and Net Interest Income (NII) perspectives, and implement effective governance structures for CSRBB management.

The course emphasises the practical challenges SME banks face in managing credit spread risk, particularly in debt securities portfolios and the interaction with IFRS 9 fair value measurements. Special attention is given to the measurement challenges in markets with limited liquidity and the development of appropriate risk management strategies for SME-focused institutions.

Participants will:

• Master the definition and measurement of CSRBB under EBA guidelines
• Distinguish between market credit spread risk and idiosyncratic credit risk
• Implement measurement frameworks for both EVE and NII perspectives
• Develop appropriate governance and risk management frameworks
• Navigate practical challenges in CSRBB implementation for SME banks
• Integrate CSRBB management with broader ALM and risk management processes

• CSRBB Framework and Regulatory Requirements
  • EBA guidelines on CSRBB: scope and definitions
  • Market credit spread vs. idiosyncratic credit risk
  • Distinction from Credit Valuation Adjustment (CVA) risk
  • Regulatory expectations and supervisory assessment
• CSRBB Measurement Methodologies
  • Economic Value of Equity (EVE) perspective
  • Net Interest Income (NII) impact assessment
  • Fair value vs. amortised cost considerations
  • Scenario design and stress testing approaches
• Implementation Challenges
  • Data requirements and market data sourcing
  • Treatment of illiquid securities and proxy methodologies
  • Currency-specific dimensions and cross-border exposures
  • Integration with existing risk management systems
• Risk Management and Governance
  • CSRBB risk appetite and limit frameworks
  • Monitoring and reporting requirements
  • Management actions and hedging strategies
  • Board and senior management oversight
• Practical Applications
  • Portfolio optimisation under CSRBB constraints
  • Integration with capital planning and stress testing
  • Interaction with IRRBB and other banking book risks
  • Business strategy implications for SME banks