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The impact of rising interest rates on risk models and balance sheet management


  • Karen Moss, Director, and asset-liability management (ALM) and balance sheet management senior practitioner, Moody’s Analytics
  • Beata Lubinska, Treasurer, Allica Bank
  • Sergio Afonso, Corporate treasury director, Lloyds Banking Group
  • Moderator: Stella Farrington, Commercial editor, Ignite, Risk.net

The rapid global hike in interest rates in recent months has left banks reviewing their risk models and revisiting balance sheet risk management. Predicting customer behaviour – such as whether people will switch out of non-maturing deposits into fixed-rate products or continue overpaying on mortgages – is never easy, but in today’s environment it is more challenging than ever.

The scale of the challenge is leading treasurers, and ALM and risk departments, to ask wider questions around balance sheet management, looking at how to achieve holistic, integrated balance sheet management with visibility across funding, liquidity and processes such as funds transfer pricing.

In addition, questions are being asked about the impact of rate hikes on Basel’s interest rate risk in the banking book (IRRBB) guidelines and IRRBB stress tests.


1:55 – Does today’s environment make integrated balance sheet management more important and how can it be achieved?

9:37 – The challenges of modelling customer behaviour in this new environment: do models need recalibrating or completely rewriting?

14:11 – How useful is historical data?

15:35 – What impact is this having on hedging?

19:55 – Do IRRBB stress tests need revisiting? What are the implications for the IRRBB framework?

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