Navigating IRRBB: Enhancing behavioural models for effective risk management
May 2025
Over the past three years, the Hong Kong Monetary Authority (HKMA) has significantly advanced the supervisory framework for interest rate risk in the banking book (IRRBB) through a series of circulars published between 2023 and 2025. Most recently, in February 2025, the HKMA released a circular reviewing how authorised institutions manage IRRBB, offering valuable guidance on utilising behavioural models in IRRBB measurement.
With concrete examples of best practices provided, the recent circular highlights the increasing supervisory focus on these models in light of notable shifts in bank profiles due to interest rate changes. This evolution signals a pivotal moment in how we approach IRRBB management, emphasising the critical role of behavioural modelling in effective risk assessment.
Discover our insights on the supervisory highlights and key considerations for enhancing IRRBB management practices through behavioural models.
