Supervisors should take action on interest rate risk – BIS paper

Core regulation alone will not neutralise all current risks, Financial Stability Institute says

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The BIS
Daniel Hinge

Rising interest rates make it more important for supervisors to deal early with individual banks’ risks, research published by the Bank for International Settlements says.

The core Basel III regulations “cannot, in isolation, address all ways in which higher rates could impact a bank’s solvency and liquidity”, the paper says. Instead, a mix of add-on capital and liquidity requirements and qualitative interventions may be necessary, Rodrigo Coelho, Fernando Restoy and Raihan Zamil argue.

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