Page 31 - 86395_CCB - 2024 Annual Report (web)

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Market

Description The risk that changes in market rates negatively impact the earnings
or market value of the Bank’s assets or liabilities.

Governance Board Risk & Compliance Committee Interest Rate Risk in the Bank Book Policy
Asset & Liabilities Committee Hedging Policy
Risk Appetite The Bank has no appetite for Foreign Currency Risk and a low appetite for Interest Risk
Statement and Basis Risk and aims to minimise these risks by keeping all assets, liabilities and off‑
balance sheet exposures in sterling and carefully managing mismatches between tenors of
loans and deposits, hedging exposures where necessary within pre‑determined limits.
Key Mitigants Scenario analysis. Modelling a variety of different yield curves/
Use of natural balance sheet hedges interest rate paths to determine potential
arising from matched re‑pricing exposure positions under different rate paths.
tenors of assets and liabilities. Product structure and pricing determined
Transaction of derivative instruments to deliver expected outcomes that
(interest rate swaps), when residual align to the Bank’s Risk Appetite.
exposure positions require hedging.
Monitoring of pipeline, repayment
profiles and product maturities.

Comments Market Risk is limited to Interest Rate Risk in the Banking Book (IRRBB), which is monitored
by the Bank’s ALCO and a suite of Key Risk Indicators and tested via scenario analysis.
The Bank does not have any exposure to foreign exchange (FX) risk or transact
in markets such as commodities or equities which can create Market Risk.
The Bank recognises the increasing probability of more changes in UK bank base rate and the
growth in its fixed rate assets and liabilities. It will continue to manage the Interest Rate Risk
that this can generate using natural balance sheet hedges as well as interest rate derivatives.