Interest Rate Risk Review and Validation
The board and senior management must understand the nature and level of interest rate risk being managed as part of the bank’s asset-liability management plan and need to ensure the formality and sophistication of the risk management process are appropriate for the overall level of risk.
What is interest rate risk? Interest rate risk is the risk your balance sheet faces from fluctuating rates. It must be identified, measured, monitored and controlled in a timely and comprehensive manner to meet the requirements of the Joint Policy Statement on Interest Rate Risk (IRR) and the subsequent IRR regulatory guidance.
Young & Associates IRR Review
At Young & Associates, we offer our clients a comprehensive Interest Rate Risk review (IRR review). This IRR review will assess the following:
- The adequacy of the bank’s internal control system, including the appropriateness of the bank’s policies, procedures, and risk tolerances used to manage and mitigate the interest rate risk
- Personnel’s compliance with the bank’s internal control system, including the effectiveness of corporate governance consisting of oversight by the Board of Directors and management’s involvement in the bank’s control of interest rate risk
- The appropriateness of the bank’s risk measurement system given the nature, scope and complexity of its activities
- The accuracy and completeness of the data inputs into the bank’s risk measurement system, including the verification that balances are correctly specified and all major instruments and portfolios are captured in the risk measurement models
- The reasonableness and validity of scenarios used in the risk measurement system, considering the bank’s nature and complexity
- The reasonableness and validity of assumptions used in the risk measurement system, considering the bank’s existing product mix and its business strategy
- The validity of the risk measurement calculations within the risk measurement system, including back-testing of the actual results versus forecasted results and an analysis of various variance sources
IRR Review Findings Report
Upon completion of an IRR review, Young & Associates will provide a full report that helps your bank appropriately assess your risk level and actions that you should take.
Our interest rate risk review report will:
- Describe our findings
- Provide suggestions for any corrective actions
- Provide recommendations for improving the quality of the bank’s interest rate risk management system and its compliance with the regulatory guidance
Need an Interest Rate Risk Review?
To learn more about Interest Rate Risk review services from Young & Associates, contact us.
