BAS Presentations - March 2023

3/1/2023

Scenario #5 Your bank has significant interest rate risk exposure to rising rates, and you’ve been directed to purchase bonds which mitigate this exposure.

What type of investments would you purchase?

(Mentimeter)

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Securities Portfolio Impacts Every Component

Capital

• Wide range of risk ‐ weightings can impact capital ratios

Asset Quality Management

• Credit risk and potential for adverse classification

• Risk management: pre ‐ purchase analysis, ongoing monitoring, etc.

Earnings Liquidity Sensitivity

• Interest Income; realized gains/losses

• Cash flow, marketability, pledging

• Term structure may contribute to or mitigate interest rate risk • Price volatility with rate changes

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