Interest Rate Risk Management: Getting Ahead of the Curve

REPORT PREVIOUSLY PUBLISHED BY OLIVER WYMAN
June 10, 2016
Industry Trends
EMEA, North America

Abstract

Management of Interest Rate Risk in the Banking Book (IRRBB) is starting to receive much more attention, after a long period in which other regulatory and risk management issues dominated the headlines. This shift results from i) market environment: stark divergence in monetary policies between US and Europe/Japan; and ii) regulatory pressures: Basel Committee’s Standards for IRRBB and sharpened US regulatory focus.

In this report, Interest Rate Risk Management: Getting Ahead of the Curve, the authors discuss the state of the industry and key enhancements banks need to focus on based on Oliver Wyman’s extensive industry work and our surveys, completed in 2011 and 2015, of the North American banking industry.  The authors expect that there will be continued and increased pressure by the regulators for banks to enhance IRRBB analytics and governance, broadly similar to the trends we have observed in the evolution of CCAR, liquidity management and resolution, and recovery planning frameworks. They highlight best practices and focus areas for banks to be best positioned for the market and regulatory requirements.

Authors:
Gokce Ozcan, Partner in the Americas Finance & Risk Practice
Deepak Kollali, Partner in the Americas Finance & Risk Practice
Jai Sooklal, Partner in the Americas Finance & Risk Practice

 

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is part of Marsh & McLennan Companies [NYSE: MMC].

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