IRRBB = Interest Rate Risk in the Banking Book

IRRBB refers to the risk that a bank’s capital and earnings will be negatively affected by changes in interest rates. It occurs in traditional banking activities, particularly due to the maturity mismatch between assets (e.g., loans) and liabilities (e.g., deposits). IRRBB measures how changes in interest rates can impact a bank’s future profitability and economic value, emphasizing the importance of managing exposure to fluctuations in market interest rates.