On 28 July 2023, the European Banking Authority ( EBA) released findings of an ad-hoc analysis of unrealised losses on financial obligation securities held at amortised expense in EU banks. The ad-hoc analysis is a targeted threat evaluation carried out by the EBA in cooperation with Member State qualified authorities, which targets at comprehending the prospective development of unrealised losses on EU banks’ financial obligation securities held at amortised expense. Since February 2023, the overall quantity of banks’ financial obligation securities held at amortised expense was 1.3 trillion EUR. The associated overall unrealised losses, web of hedge modifications, totaled up to 75bn EUR, revealing a boost considering that completion of 2021 as rates of interest have actually been increasing. Since February 2023, gross unrealised losses were alleviated by hedges totaling up to 38bn EUR.
The EBA mentions that theoretical gains and losses determined in the analysis ought to be examined thinking about the general interest threat management of the banks. In this regard, the EBA Standards on rate of interest dangers for banking book and credit spread threat occurring from non-trading book activities, that include the financial worth of equity, cover the examination of the general rate of interest threat management.