Credit spread risk from non-trading book activities (CSRBB)
Regulatory Definition
The risk driven by changes in the market perception about the price of credit risk, liquidity premium and potentially other components of credit-risky instruments inducing fluctuations in the price of credit risk, liquidity premium and other potential components, which is not explained by IRRBB or by expected credit/(jump-to-)default risk.
EBA GL/2022/14
What This Actually Means
The value of your bond portfolio can drop not because base rates moved, but because credit spreads widened. Your government bonds might be fine, but your corporate bond and covered bond holdings lose market value when spreads blow out — even if the issuer remains perfectly solvent.
Where It Matters
Became a major regulatory focus after the 2022-23 rate cycle. Banks holding large HQLA portfolios of covered bonds and government bonds saw significant mark-to-market losses from spread widening. CSRBB is now a standalone requirement under EBA guidelines — you need to measure and monitor it separately from IRRBB.
Scope ambiguity is the central challenge. The EBA guidelines require institutions to identify and monitor CSRBB, but the scope of what's in and what's out is not straightforward. Instruments held at fair value have an obvious credit spread exposure — if spreads widen, the mark-to-market value falls. But the EBA also expects institutions to document and justify why they exclude instruments held at amortised cost from CSRBB measurement. For most banking books, the majority of assets (customer loans, commercial lending) sit at amortised cost and were never priced off a market credit curve — yet the regulatory expectation to explain the exclusion creates a documentation and governance burden that can consume significant effort. The practical result is that CSRBB scope discussions often take longer than the measurement itself.
Risk that bond values drop due to spread widening, not base rate moves.