Covers a range of topics relating to mortgages and the wider housing market.
Covers issues relating to savings accounts and payments.
Covers developments in conduct of business regulation
Covers issues relating to the corporate governance and constitution of building societies.
People related matters such as talent development, apprenticeships and diversity.
Internal and external accounting assurance and matters relating to tax.
The regulation and supervision of firms to ensure their safety and soundness under the remit of the Prudential Regulation Authority.
A new legal aid scheme to support borrowers at risk of repossession (member only content).
A wide range of statistics relating to the UK mortgage and housing markets.
Research, analysis and guidance about our members and the issues that affect them.
Retail savings data including net receipts and deposits, ISAs and interest rates.
Operational and financial information about building societies. Includes AGM & financial results and remuneration details.
Submission and publication deadlines for BSA data and reports.
Mortgage approvals pick up & further cut to Bank Rate expected this year.
News and views on topical issues from the BSA and guests.
View our latest press releases and comment here.
The BSA's quarterly magazine covers whats happening in the world of building societies, credit unions and the wider financial services sector.
A quarterly survey that assesses consumer sentiment regarding the UK property market.
View biographies and download photos of the BSA's key spokespeople
BSA speeches from events and seminars
View the latest webinars, training and other events open to members, associates and other stakeholders
View our latest BSA Annual Conference and comment here.
View our latest Past events & summaries and comment here.
Learn how to promote your event to the BSA's membership.
Treasury management training for credit unions (28th November 2024)
Find factsheets on mortgages, savings and the building society sector.
Track building societies that no longer exists and get a link to its successor's website.
Find mortgage instructions and specific requirements setting out individual building society policies.
The UK Savings Week campaign aims to get people engaged in saving.
Toolkits to develop Workplace Savings are available here.
Here you can find our publications, responses to consultation documents, mortgage instructions, statistics and sector job vacancies.
Find out more about the BSA and the sector.
Contact details for each of our 49 members.
Our Associate members include a wide range of companies from insurers, banks, accountants, solicitors, and other business suppliers to BSA members.
The National Credit Union Forum (NCUF) is the Credit Union Committee of the BSA.
View biographies and download photos of our key spokespeople
Vacancies for senior management, executive and other positions at the BSA and its member organisations
Find out the wide range of benefits of joining the BSA as an associate member.
The Building Societies Association is the voice of the UK's building societies.
Guest blog by Luke DiRollo, Chief Product Officer at Almis International
In February 2024, the Basel Committee on Banking Supervision (BCBS) released consultative document for recalibration of shocks for interest rate risk in the banking book, issued for comment by 28 March 2024.
In April 2016 the Basel Committee published its standard on interest rate risk in the banking book (IRRBB), which was most recently updated with SPR98 on 15 December 2019. The standard requires banks to calculate measures of interest rate risk for their banking book exposures with the measures based on a specified set of interest rate shocks for each currency for which the bank has material positions. The Committee noted the severity of the specified shocks would be subject to periodic review. The purpose of December 2023’s Consultative Document is to detail a set of prescribed adjustments to the specified interest rate shocks in the IRRBB standard, alongside adjustments to the current methodology used to calculate the shocks. These changes are deemed necessary to address problems with how the current methodology captures interest rate changes during periods when rates are close to zero due to fundamental shortcomings in basic risk management of traditional interest rate risk.
Current Interest Rate Shocks
The IRRBB standard requires banks to apply specified interest rate shocks to risk-free yield curves for each currency for which the bank has material positions. Under the standardised approach, banks must determine the impact of these shocks on their economic value of equity (EVE) and net interest income (NII). The shocks that must be applied to the risk-free yield curve for each currency is set out in the following table, which is derived from historical data during the period from January 2000 to December 2015:
The methodology used to produce the specified shocks combined three elements: (i) average interest rates for each currency; (ii) global shock parameters that are applied to the average rates for each currency; and, (iii) application of a floor, a set of caps and rounding.
Average interest rates were calculated for each currency using interest rate data from the calculation period, covering tenors from 3 months to 20 years:
The next step used to calculate the specified shocks was to multiply the average interest rates by the following set of global shock parameters:
Applying the global shock factors to the average interest rates for each currency gives the following unfloored, uncapped, unrounded interest rate shocks:
The IRRBB standard notes in SPR98.60 that the methodology can lead to unrealistically low interest rate shocks for some currencies and to unrealistically high shocks for others. To ensure a minimum level of prudence and a level playing field, a floor and a set of caps are applied. The floor is set at 100bp and the caps are set at 400bp for the parallel shock, 500bp for the short-term shock and 300bp for the long-term shock. Finally, the amounts are rounded to the nearest 50bp.
Problems with methodology used to calculate global shock parameters
The main objective of the Committee’s review of the interest rate shocks in the IRRBB standard was to update the interest rate data that is used in the calibration of the shocks. The current standard uses data from the period January 2000 to December 2015 and the Committee would like to extend that period to cover the period January 2000 to December 2022. Expending the period used, however, reveals a problem with the above methodology for calculating global shock parameter.
The shock parameters are generated from the average of 99th and 1st percentiles of rolling six-month percentage changes in interest rates (i.e. [rate in six months – current rate] / current rate). When rates are close to zero, the rate of change can be very large. For example, when the rate went down from 0.02% to 0.001% (0.019% difference) in six-months for a certain currency, the shock parameter is 95%. In another example, however, when the rate went up from 5.5% to 5.519% (the same 0.019% difference), the shock parameter is just 0.35%. The same calculation generates huge differences depending on the original level of interest rates. Therefore, in addition to updating the data period used to calibrate the interest rate shock parameters, the Committee has agreed to propose revisions to the way the shock parameters are calculated.
Comparison of existing and new methodology
The table below shows the interest rate shock parameters calculated using the proposed new methodology, with the data through to end-2022. The colours in the table show whether the shock sizes under the proposed new methodology results in an increase, decrease or are unchanged relative to the existing shock factors:
The following table quantifies the impact of the proposed change to the interest rate shock of each currency:
For most currencies the standard shocks have increased, e.g. the current 250bps parallel shock for GBP and 200bps parallel shock for EUR are proposed to increase to 300bps and 250bps respectively. If introduced, this would likely lead to banks revisiting their IRRBB framework including risk appetite, modelling, and hedging capacity.
About the author: Luke Di Rollo, Chief Product Officer, is a seasoned professional in the banking industry with nearly a decade of experience specialising in Asset and Liability Management (ALM) and Interest Rate Risk in the Banking Book (IRRBB). Throughout his career, he has developed and implemented several widely adopted models within the UK banking sector. Luke holds a CertBALM qualification and is a member of the Association of Corporate Treasurers (ACT), underscoring his expertise and commitment to the field.
Find out more: Visit https://www.almis.co.uk/
This webinar will cover a summary of the Employment Rights Bill, with a focus on the proposed changes that will affect Building Societies in particula...
The BSA strongly supports the principle of charging a fee to CMCs.
Our response to FCA GC23-2