Credit Spread Risk in the Banking Book (CSRBB)
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Moorad Choudhry
34 years: Banking and Capital Markets
In this video, Moorad demystifies the credit spread risk in the Banking Book (CSRBB), a crucial factor for banks. He covers its basics, regulatory requirements, practical application, and relevance in today's banking landscape. Join us to understand how CSRBB impacts financial institutions and their risk management strategies.
In this video, Moorad demystifies the credit spread risk in the Banking Book (CSRBB), a crucial factor for banks. He covers its basics, regulatory requirements, practical application, and relevance in today's banking landscape. Join us to understand how CSRBB impacts financial institutions and their risk management strategies.
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Access this and all of the content on our platform by signing up for a 7-day free trial.
Credit Spread Risk in the Banking Book (CSRBB)
14 mins 14 secs
Key learning objectives:
Understand the concept of credit spread risk in the banking book and what impact it has
Outline CSRBB regulatory requirements
Understand the application of CSRBB in practice
Understand the overlap between CSRBB and other regulatory and accounting regimes
Overview:
Credit Spread Risk in the Banking Book (CSRBB) pertains to how credit spread changes influence a bank's financial instrument values, notably within its banking book for long-term assets. Instruments like bonds are sensitive to these fluctuations; for example, a wider spread might lower a bond's value. This was underscored by Silicon Valley Bank's 2023 issues from US Federal Reserve rate hikes. Banks with significant bond portfolios need to be especially vigilant of CSRBB and monitor their exposures. The Basel guidance emphasises that banks must manage both interest-rate and credit-spread risks. For banks, CSRBB chiefly impacts bond portfolios, with the EBA noting that changes in credit spread at the portfolio level should be evaluated. The practical application focuses on a bank's bond holdings, especially those under Fair Value through Other Comprehensive Income (FVOCI) rules. Yet, the inclusion criteria for CSRBB remain debated, as does its overlap with IFRS 9 accounting.
Subscribe to watch
Access this and all of the content on our platform by signing up for a 7-day free trial.
Subscribe to watch
Access this and all of the content on our platform by signing up for a 7-day free trial.
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Moorad Choudhry
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