Effective control of interest rate risk requires a comprehensive risk management process that includes the following elements:
- Policies and procedures designed to control the nature and amount of interest rate risk the bank takes including those that specify risk limits and define lines of responsibilities and authority for managing risk.
- A system for identifying and measuring interest rate risk.
- A system for monitoring and reporting risk exposures.
- A system of internal controls, review and audit to ensure the integrity of the overall risk management process.