Why IRRBB Models Are Failing and What Banks Must Fix Before Regulators Do It for Them

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Svetlana Kardan delivers a provocative warning: most banks’ IRRBB and NMD models would not withstand regulatory scrutiny if submitted today. She argues that the industry’s framing of a “post‑hiking cycle” is dangerously outdated. The SONIA curve’s violent bear‑steepening, driven by geopolitical shocks rather than domestic fundamentals, exposes the fragility of assumptions embedded in structural hedges, deposit models, and ALCO playbooks. Parallel shocks no longer capture sequencing risk; term‑premium repricing is now structural; and the divergence between UK and European NIMs is driven not by market structure but by hedging strategy and deposit pass‑through behaviour.