Highlights:
- The board of directors and senior bank management are responsible
for the establishment, approval, implementation, oversight, and annual
review of IRR management strategies, policies, procedures, and limits
(or risk tolerances).
- Analysis of an institution's exposure to IRR should include assessing
the likely effects of meaningful stress scenarios, including interest rate
shocks of at least 300 to 400 basis points
- Capital and earnings should be sufficient to support an institution's IRR
profile.
- If IRR measures approach or exceed risk limits, management should
take steps to limit or mitigate the exposure, for example, by hedging or
altering the balance sheet.
- Financial institutions are expected to conduct independent reviews of
their IRR models and management processes. If third-party models
are used, management should obtain documentation of the results
from reviews conducted by the vendor.
Distribution:
FDIC-Supervised Banks (Commercial and Savings)
Suggested Routing:
Chief Executive Officer
Chief Financial Officer
Chief Risk Officer
Referenced Guidance:
Joint Agency Policy Statement on Interest Rate Risk, FIL-52-96
Attachment:
FDIC Press Release on IRR Advisory
FFIEC Press Release on IRR Advisory
FFIEC Advisory on Interest Rate Risk Management - PDF (PDF Help)
Contact:
Kyle Hadley, Chief, Exam Support, at
KHadley@fdic.gov or (202) 898-6532
Printable Format:
FIL-2-2010 - PDF (PDF Help)
Note:
FDIC financial institution letters (FILs) may be
accessed from the FDIC's Web site at
www.fdic.gov/news/financial-institution-letters/index.html
To receive FILs electronically, please visit
http://www.fdic.gov/about/subscriptions/fil.html.
Paper copies of FDIC financial institution letters may
be obtained through the FDIC's Public Information
Center, 3501 Fairfax Drive, E-1002, Arlington, VA
22226 (1-877-275-3342 or 703-562-2200).
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