Interest rate risk in community banks: regulatory concerns intensify

Regulatory Guidance on IRR Supervisory expectations related to IRR management are contained primarily in two documents: the 1996 Joint Agency Policy Statement on Interest Rate Risk and the 2010 Interagency Advisory on Interest Rate Risk Management. The FDIC lists these common findings related to the...

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Bibliographic Details
Published in:The RMA Journal 2015-03, Vol.97 (6), p.46
Main Author: Mason, Bernard
Format: Article
Language:English
Subjects:
Bank examinations
Bank examiners
Banking industry
Behavior
Boards of directors
Community banks
Directors
Interest rates
Measurement techniques
Mortgage backed securities
Profits
Regulation of financial institutions
Regulatory compliance
Risk management
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Summary:Regulatory Guidance on IRR Supervisory expectations related to IRR management are contained primarily in two documents: the 1996 Joint Agency Policy Statement on Interest Rate Risk and the 2010 Interagency Advisory on Interest Rate Risk Management. The FDIC lists these common findings related to the independent review process: * Independent review of the IRR management process is not performed annually. * Assumptions used in the income simulation or economic value of equity (EVE) calculations were not tested by the reviewer. * Third-party validation of the vendor's model was not obtained. * Independent review was not sufficiently comprehensive. * Independent review was not formalized in the ALM policy. * Independent review scope did not include back-testing or the reconciliation of back-testing results. * Results of the independent review are not being adequately reported to the board of directors. * Independent reviewer lacks adequate training.
ISSN:1531-0558