China's National Financial Regulatory Administration issues new market risk management measures for commercial banks and removes banking book interest rate risk from scope

China's National Financial Regulatory Administration has replaced its long-standing “Guidelines on Market Risk Management of Commercial Banks” with new “Measures for Market Risk Management of Commercial Banks”, updating supervisory expectations for how banks define, govern and manage market risk in light of evolving business practices and the implementation of the “Capital Management Measures for Commercial Banks”. The Measures redefine market risk to focus on profit and loss volatility arising from adverse movements in interest rates, foreign exchange, equity prices and commodity prices, and explicitly exclude interest rate risk in the banking book (IRRBB), which is to be managed under the revised IRRBB management guideline. The new framework comprises five chapters and 43 articles, strengthens governance requirements by clarifying the responsibilities of the board, supervisors and senior management, and specifies the scope and roles of the three lines of defence, including an emphasis on market risk management at the group consolidated level. It also sets more granular end-to-end management expectations covering risk identification, measurement, monitoring, control and reporting, and updates requirements on internal models, model management and stress testing to align with the current market risk measurement framework and management practices, including internal model validation and effectiveness monitoring.