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Interest Rate Risk (IRR)

The FDIC has consolidated a number of resources relating to Interest Rate Risk. 

This webpage will allow users to:

Interest Rate Risk

Interest rate risk is the exposure of a bank’s current or future earnings and capital to adverse changes in market interest rates.  This risk is a normal part of banking and can be an important source of profitability and shareholder value; however, excessive interest rate risk can threaten banks’ earnings, capital, liquidity, and solvency.  Accordingly, boards of directors should ensure that management effectively identifies, measures, monitors and controls interest rate risk through effective policies and risk management processes.

Standards for Large Internationally-Active Institutions

In April 2016, the Basel Committee on Banking Supervision issued Interest Rate Risk in the Banking Book standards, which revise the 2004 Principles for the Management and Supervision of Interest Rate Risk.  These standards apply to internationally-active institutions.  The international standards do not apply to community banks.