Capital Markets School

Internal Use Only

Interest Rate Risk Modeling Process

Inputs (GL, Loans, Investments, Deposits)

Model Outputs (Net Interest Income and Economic Value of Equity)

Interest Rate Risk Measurement Model/System

Scenarios (Shocks, Ramps, Non Parallel)

Assumptions (Prepayments, Betas, Average Life)

Internal Use Only

Purpose of the Independent Review

To provide assurance that the projected effects to earnings and balance sheet is as accurate as possible, and that changes made today will not have negative impacts in the future

To provide the assurance that the highly technical process of interest rate risk modeling is completed properly