Alert August 13, 2013

FDIC Releases Video Guidance Regarding Management of Interest Rate Risk

The FDIC released on its website a new video (the “Video”) in its third installment of technical assistance videos designed to provide guidance to bank directors, officers and employees regarding regulatory and compliance issues and recent changes and developments.  Over the past several months the FDIC and other bank regulatory agencies have strongly urged banking institutions, in light of the current low level of interest rates and the potential significant increase in interest rate levels, to make certain that the applicable bank has in place robust processes to measure, and if needed mitigate, the bank’s exposure to potential increases in interest rates.

The Video, which is over one hour in length, discusses interest rate risk and key elements of a bank’s management and oversight of interest rate risk.  The Video has eight segments which cover, respectively,

  1. Overview of Interest Rate Risk; Recent Industry Trends
  2. Types of Interest Rate Risk
  3. Measurement Systems
  4. Rate Changes and Prepayment Assumptions
  5. Deposit Assumptions
  6. Risk Limits and Mitigation
  7. Internal Control and Review
  8. Review of Interest Rate Risk Management and Additional Resources

The Video is designed to be particularly useful to directors and officers of community banks, including members of a bank’s asset-liability management committee.  The first two installments of the FDIC’s technical assistance videos were discussed in the April 9, 2013 Financial Services Alert and the July 30, 2013 Financial Services Alert.