Plansmith Blog

Regulatory Expectations: IRR & Liquidity

Posted by Dave Wicklund on 11/6/19 10:51 AM

Does your organization have the IRR and Liquidity knowledge it needs to succeed?

Regulatory guidance emphasizes the importance of effective corporate governance and outlines expectations for both board members and senior management personnel. Specifically, interagency guidance identifies the board of directors as having the ultimate responsibility for the risks undertaken by an institution – including IRR and liquidity.

As a result, the regulators expect directors to understand and be regularly informed about the level and trend of their institutions’ IRR and liquidity exposures. The board or its delegated committee of board members is expected to oversee the establishment, approval, and implementation of asset/liability management (ALM) strategies, policies, procedures, and limits (or risk tolerances). Senior management, on the other hand, is responsible for ensuring that board-approved strategies, policies, and procedures for managing IRR and liquidity are appropriately executed within the designated lines of authority and responsibility.

Regulatory guidance specifically notes that senior management is responsible for maintaining:

  • Appropriate policies, procedures and internal controls addressing asset/liability management, including limits and controls over risk taking to stay within board-approved tolerances;
  • Comprehensive systems and standards for measuring interest rate and liquidity risk, valuing positions, and assessing performance, including procedures for updating measurement scenarios and key underlying assumptions driving the institution’s ALM analysis; and
  • Sufficiently detailed reporting processes to inform senior management and the board of the level of risk exposure.

As a former FDIC Examiner, I know how difficult it can be to ensure all those bases are covered. I also know that getting the education that you and your board need can be difficult. That's why we’ve developed a number of training videos geared at providing your organization with the knowledge that examiners expect both your board and senior management to have.

Whether you're looking for simple and easy-to-understand board training or more comprehensive education for CFOs, Plansmith has a variety of educational options to meet your needs.

Get the training that’s right for your team for as little as $295!

Click here to learn more.

Topics: IRR, asset liability management, liquidity, FDIC

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