NCUA: Interagency Advisory on Interest Rate Risk Management (January 6, 2010)

The federal financial regulators remind institutions of supervisory expectations regarding sound practices for managing interest rate risk (IRR). The regulators recognize that some degree of IRR is inherent in the business of banking. At the same time, however, institutions are expected to have sound risk management practices in place to measure, monitor, and control IRR exposures. The regulators expect all institutions to manage their IRR exposures using processes and systems commensurate with their earnings and capital levels, complexity, business model, risk profile, and scope of operations. Effective IRR management processes are particularly important for those institutions experiencing downward pressure on earnings and capital due to lower credit quality and market liquidity.