...
11
Basel Committee on Banking Supervision:
Principles for the Management of InterestRateRisk
http://www.bis.org/publ/bcbs108.pdf?noframes=1
1
ADVISORY ON INTERESTRATERISKMANAGEMENT
January ... Supervision:
Management of InterestRate Risk; Investment Securities and Derivatives Activities
(TB-13a) http://files.ots.treas.gov/84074.pdf
Risk Management Practices in the Current InterestRate ... model to measure exposure to interestrate risk, unless otherwise
directed by their OTS Regional Director.
10
APPENDIX A
REGULATORY GUIDANCE ON INTERESTRATERISK
Federal Deposit Insurance...
... implementing the interestrateriskmanagement policies;
ensuring that interestraterisk is managed and controlled within the interest
rate riskmanagement programme;
InterestRateRiskManagement ... InterestRateRiskManagement Page 8
Bank of Jamaica
March 1996
InterestRateRiskManagement Page 16
Bank of Jamaica
March 1996
A dynamic analysis of interestraterisk ... procedures.
Interest RateRiskManagement Policies
Sound and prudent interestrateriskmanagement requires clear policies. These
policies need to include:
an interestraterisk philosophy...
... place.
5
Table 6: Effect of InterestRate Surprise on Bank Stock Returns
(By Usage of InterestRate Derivatives)
Interest Rate Surprise
Median Bank Level Slope
With median interestrate derivatives position ... estimated interestrate beta s were, in general, positive for their sample of banks. Because bond prices move
inversely with interest rates, this implies that bank s tock return and interest rates ... intermeeting policy moves from the sample.
4 Bank- Specific Determinants of InterestRate Risk
In this section, we examine how the reaction of bank stock r et ur ns to polic y -i nd uc ed interest rate
shocks...
... Discount, and Market Interest Rates
2
4
6
8
10
Percent
January 1985 January 1990 January 1995
Lombard rate
Discount rate
3-month interest rate
ANTICIPATION IN CENTRAL BANKINTERESTRATEPOLICY 663
Figure ... Bundesbank for their
helpful comments.
official interestrate s
τ
that exactly determines the current overnight inter-
bank interest rate, which will be denoted r(1)
τ
. The interestrate on ... of
ANTICIPATION IN CENTRAL BANKINTERESTRATEPOLICY 661
15
Rudebusch (1995) contains a discussion of the relationship between the term
structure and central bankinterestrate policy. It might have...
... monitoring of bankrisk profiles.
CONCLUSION
Interest raterisk does not currently appear to present
a major risk to most commercial banks. Nevertheless,
for individual institutions, interestraterisk ... important part of
the management of interestraterisk at certain banks.
The notional amount of interestrate contracts—such
as interestrate options, swaps, futures, and forward
rate agreements—has ... model
are the following: fixed rate mortgage products,
An Analysis of Commercial Bank Exposure to InterestRateRisk 125
ESTIMATED INTERESTRATE RISK
OF
COMMERCIAL BANKS
Because the basic and OTS...
... to interestraterisk 10
5.2 Earnings from term transformation 12
6 Conclusion 14
atic factor that drives the banks’ exposure to interestrate risk, i.e. μ(t). Now, we are
investigating, at bank ... P. (1990). Interest- raterisk and the pricing of depository financial intermedi-
ary common stock. Journal of Banking and Finance 14, 803–820.
17
Banks’ exposure to interestrate risk, their ... determines changes in banks’ exposure
to interestraterisk and whether the interestrate regulation has an impact on banks’
behavior. By contrast, practitioners are more interested in the earning...
... national banks.*
Comptroller's Handbook 47 InterestRateRisk
Interest Rate Risk
Low
Interest Rate Risk
Moderate
Interest Rate Risk
High
Responsible officials fully understand all aspects of interest ... Major sources of the banks interestrate risk.
ã Level of interestraterisk assumed by the bank.
ã Quality of the banks interestrateriskmanagement process.
ã Adequacy of the banks capital.
ã ... in addition to national banks.*
InterestRateRisk 46 Comptroller's Handbook
Interest RateRisk Appendix D
Community BankRisk Assessment System
for InterestRate Risk
Evaluation Factors
Examiners...
... stable, it enables banks to buy long dated assets,
without bearing interestrate risk.
Interest raterisk measurement in banking can be done by simulating a scenario of higher interest rates,
and putting ... The interest- rate on savings bank deposits: 3.54%.
ã The interestrate on time deposits: 7%.
ã The interestrate on the liabilities side for borrowings by the bank: 6.58%.
ã The interestrate ... the interestraterisk exposure of a
bank.
The questions explored in this paper are pertinent to banks and their supervisors. From the view-
point of a bank, measurement of interestrate risk...
... The Central Bank of the Bahamas InterestRateRisk
BANK SUPERVISION DEPARTMENT Page 6 of 10
risk profile. Nonetheless, a comprehensive interestrateriskmanagement
program ... higher interestraterisk exposure or
holding of complex instruments with significant interest- rate option
characteristics may require more elaborate and formal interestraterisk
management ... Central Bank of the Bahamas InterestRateRisk
BANK SUPERVISION DEPARTMENT Page 5 of 10
x. re-evaluate significant interestrateriskmanagement policies,
procedures and risk limits...
...
typically able to incorporate a wider range of interestraterisk sources and can
therefore provide a better measure of interestraterisk exposure.
One such source of interestraterisk is ‘embedded ... into two components: traded interestraterisk and non-traded interestrate
risk. (The latter is often referred to as interestraterisk on the balance sheet or in the
banking book.) Both refer ...
Interest raterisk is the risk that an ADI will experience a deterioration in its financial
position as interest rates move over time. ADIs, and regulators, typically split interest
rate risk...
... make interestrateriskmanagement more effective. Using derivatives can
thus be considered as a part of any bank s interestrateriskmanagement strategy and also its total
risk management strategy ... relatively inexpensive means for banks to alter their interest
rate risk exposure (Hirtle, 1996);
x Derivatives provide a means for banks to more easily separate interestraterisk man-
agement from ... essential that banks accept some degree of interestrate risk. However for a bank to
profit consistently from changes in interest rates requires the ability to forecast interest rates better
than...
... of monetary policy depends on the degree and the speed of interestrate adjustment to
change in policy controlled interest rate. Both theoretically and empirically, the interestrate channel ... were more open to interestrate risk, private ones were more prone to exchange rate risk.
Within the private banking system there were some midsized banks that were heavily concentrated in
government ... earnings of banks from loans market are a function of interestrate on loans since
probability of default of borrower is increasing with higher interest rates. Increasing interest rates could...
... is interestrate risk? 3
2. Sources of interestraterisk 3
3. Impact of adverse movements in interest rates on organisations 4
4. Methods to measure interestraterisk 4
5. Methods to manage interest ... expect
interest rates to fall.
Outright interestraterisk ã the impact of a change in the overall level of interestrate risk.
For example, if an investor holds a fixed interest bond and interest ... the interest repricing of assets or -
liabilities over time.
8
Notes
CPA88427 03/2008
3
Understanding and Managing InterestRate Risk
1. Definition – what is interestrate risk?
Interest rate risk...
... of fixed -rate commercial loans are consistent with recent evidence on
“debt market timing.”
Key words: fixed -rate loan, adjustable -rate loan, corporate risk management,
interest rate risk
Vickery: ... sensitive to interest rates and other external shocks,
empirical work on corporate riskmanagement has focused instead on large public
companies. This paper studies fixed -rate and adjustable -rate loans ... share of fixed -rate loans, ameliorating their ex-ante sensitivity to interestrate
Federal Reserve Bank of New York
Staff Reports
How and Why Do Small Firms Manage InterestRate Risk?
Evidence...