Capital Markets School

Internal Use Only

Interest Rate Risk Management

• Board should establish an appropriate framework to identify, measure, monitor, and control interest rate risk

– Board Oversight – Senior Management Oversight – Policies and Procedures – Strategies – Risk Limits – Risk Monitoring and Reporting

Internal Use Only

IRR – Process Overview

Policy

Inputs (GL, Loans, Investments, Deposits)

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

Scenarios (Shocks, Ramps, Non-Parallel)

Interest Rate Risk Measurement Model/System

Board Reporting

Assumptions (Prepayments, Betas, Average Life)

Independent Review