ICAAP
Definition
Internal Capital Adequacy Assessment Process. The institution's own assessment of capital needs including for IRRBB under Pillar 2.
What This Actually Means
Your bank's own internal assessment of how much capital you need to hold for all risks, including IRRBB. For IRRBB specifically, you need to demonstrate you understand your risk profile, have appropriate limits, and hold sufficient capital buffers under stress.
Where It Matters
IRRBB typically appears as a Pillar 2A capital add-on. The PRA and other regulators will set a specific capital requirement based on your ICAAP submission and their own SREP assessment. Banks that can demonstrate strong IRRBB management and measurement frameworks generally receive lower add-ons.
Your bank's own view of how much capital it needs, including for IRRBB.