The interest rate conundrum – why P&L and IRRBB disclosures tell a different story

Have you ever wondered why the Net Interest Income (NII) increased for most European banks in 2023, while their disclosures for interest rate risk in the banking book (IRRBB) show an opposite exposure?

In a guest article on banking hub by ZEB, Orbit36 Managing Partner Andreas Ita explains the alleged discrepancy between the banks’ negative IRRBB exposures and the observed increase in profitability. Further, he discusses the European banks’ challenges of meeting the ECB’s supervisory outlier tests (SOT) for both NII and economic value of equity (EVE). This requires banks to adapt their hedging strategies.

The article can be found here:

https://www.bankinghub.eu/research-markets/interest-rate-risk-conundrum