Financial Regulators Release Interest Rate Risk FAQ
January 18, 2012
January 19, 2012
The Federal Financial Institutions Examination Council (FFIEC) has reiterated “the need for sound management of interest rate risk (IRR)” and highlighted sound IRR practices in a new frequently asked questions (FAQ) document. The FAQ answers a number of questions that were submitted following a January 2010 FFIEC advisory on IRR management.
The FAQ addresses appropriate measurement and reporting, robust and meaningful stress testing, assumption development reflecting the institution’s experience, and comprehensive model validation. It also provides examples of risk management expectations for institutions of various risk profiles and includes direction on how to adjust processes as profiles change. How financial institutions can determine which IRR vendor model is appropriate for their unique situation, what types of IRR measurement methodologies institutions are expected to use, and other more technical IRR issues are also addressed.
The FFIEC is comprised of the leaders of the National Credit Union Administration (NCUA), the Federal Reserve, the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), the Federal Deposit Insurance Corporation (FDIC), and the newest member, the Consumer Financial Protection Bureau (CFPB). NCUA Chairman Debbie Matz succeeded FDIC Chairman Sheila Bair as head of the FFIEC last spring, and Matz is serving a two-year term.
Questions? Contact the Compliance Hotline: 1.800.546.4465, firstname.lastname@example.org.