Interest Rate Risk Review and Validation

Confirm your interest rate risk model reflects
current exposures and changing conditions.

Interest rate risk (IRR) is inherent in banking. Excessive or poorly managed IRR can threaten a bank’s earnings and capital1 Guidance from the Joint Policy Statement on Interest Rate Risk and related regulatory expectations reinforces the need for a disciplined approach.

Effective interest rate risk management depends on the knowledge and effectiveness of the Bank’s Asset Liability Committee (ALCO) and Board of Directors to identify, measure, monitor and control interest rate risk. Each Bank must have IRR management appropriate to the level of their IRR and the nature, mix and complexity of their products. Our reviews help banks ensure the interest rate risk management system effectively navigates the financial condition and resilience of the bank from movements in interest rate while considering their business strategy, products, balance sheet composition, and risk profile.

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Interest rate risk model validation for your institution

Controls

Ensure your policies, procedures, and tolerances are effective for the IRR of the Bank.

Personnel

Ensure the bank’s staff (management, ALCO and the Board) are knowledgeable and effective at managing the interest rate risk of the bank.

Model

Ensure the ALM model, key assumptions and its use is appropriate for the Bank’s business strategy, nature, scope and complexity.

Verify

Verify the validity of model forecasts by comparing to actual results.

Our interest rate risk reviews

We provide a comprehensive interest rate risk review for banks to assist banks in improving their interest rate risk management and model performance. We leverage our technical expertise and industry knowledge to assess your interest rate risk related controls, ALM model, assumptions, and calculations and provide actionable insights to improve the IRR management at your Bank. Our reviews assess the following:

	The adequacy of the Institution’s internal control system, including the appropriateness of the Institution’s policies, procedures, and risk tolerances used to manage and mitigate the risks. Young & Associates, Inc. will review the Institution’s existing interest rate risk and will provide written recommendations for changes or additions to the existing policy documents based on the industry standards and regulatory guidelines.
	Personnel’s compliance with the Institution’s internal control system, including the effectiveness of corporate governance consisting of oversight by the Board of Directors and management’s involvement in the Institution’s control of interest rate risk.
	The appropriateness of the Institution’s risk measurement system given the nature, scope and complexity of its activities.
	The accuracy and completeness of the data inputs into the Institution’s risk measurement systems, including the verification that balances are correctly specified and that all major instruments and portfolios are captured in the risk measurement models.
	The reasonableness and validity of scenarios used in the risk measurement systems, considering the Institution’s nature and complexity.
	The reasonableness and validity of assumptions used in the risk measurement systems, considering the Institution’s existing product mix and its business strategy.
	The validity of the risk measurement calculations within the interest rate risk measurement systems, including back-testing of the actual results versus forecasted results and an analysis of various variance sources.

IRR review deliverable

Our final interest rate risk review report will assess each of the above, describe the findings, provide suggestions for any corrective actions, and include recommendations for improving the quality of the Institution’s interest rate risk management systems, and their compliance with the regulatory guidance.

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Y&A’s practical approach
to interest rate risk

Operational ease

You will have a dedicated leader from Y&A that will walk through every step of the review with you to help keep the process efficient for your team.
Direct guidance

Get personal support from a team that understands the process.
Straightforward reporting

Review findings that are clear and concise.
Adaptable process

Scale the approach to match your institution.

Need an interest rate risk review?

Our team helps financial institutions evaluate their interest rate risk management framework, review model performance, and identify opportunities to strengthen oversight.

Contact us to learn how we can support your institution with a clear, practical approach tailored to your needs.