Global banks' internal models for calculating interest rate risk could be scrapped under new proposals from the basel committee on banking supervision, the latest in a series of moves from the body over the past few years to rein in the perceived gaming of current rules. The global rule-making body has described as imperative the need to take action on interest rate risk given that current exceptionally low levels really have only one way to move - up. But it is also keen to limit incentives for capital arbitrage when banks shift rate-sensitive assets from their trading books where rate risk is captured, to their bank books where the risk can be downplayed.
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