Large Bank Examination Workshop February 2026

Model Inputs - Assumptions • An organization may feel that it is better to derive its assumptions by studying its own customer base than by using general information about national or regional populations. • Interagency FAQ on Interest Rate Risk Management (2012) specifically encourages use of institution-specific assumptions. • An organization may feel that it has a special insight into market behavior, and that its assumptions about markets are superior to publicly available assumptions.

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Validation Issues - Assumptions Biggest problems regarding assumptions – customer options: • Optionality in loans or securities

 Prepayments  Call features  Caps and floors • Optionality in funding sources  Core deposits  Callable/Putable FHLB advances

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