Interest Rate Risk in the Banking Book - Preparing the European Banking System for a Sudden Upward Shift in Interest Rates - together with: Marc Wambold

Recovering from the pandemic with the help of unprecedented levels of fiscal stimulus and monetary easing might well lead to the return on inflation in the medium term. This will require the ECB and other central banks to react by limiting tender operations, tapering and stopping bond purchase programs and raising interest rates. To avoid collateral damage in banks’ balance sheets we need to prepare the banking system today for a rapid upward shift in interest rates.