Basle II capital interest shock

A parameter that requires institutions to calculate the cash effects of two interest rate developments specified by the supervisory authorities. The loss from the most unfavorable interest rate development for the bank is then set in relation to the regulatory capital of the institution. This results in the interest rate risk coefficient as a regulatory indicator of the interest rate risk in the banking book. – Cf. Deutsche Bundesbank Monthly Report of June 2012, p. 55 ff. (detailed presentation; overviews; source references to the Basel II framework).

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