MMCSensitivitytoMarketRiskExamProcedures.doc.docVIP

MMC Sensitivity to Market Risk Exam Procedures: Examination Procedures Y N Examiner Notes [Document supporting evidence and note determinations and findings made] 1 Are policies, procedures, and risk limits related to IRR adequate? 2 Are internal controls related to IRR adequate? 3 Are the audit or independent IRR review functions adequate? 4 Are information communication systems related to IRR adequate and accurate? 5 Do the characteristics of the institutions assets, funding sources, and financial derivative contracts indicate a low Interest Rate Risk (IRR) profile? 6 Is the level of risk reasonable relative to capital and earnings levels? 7 Do the board and senior management effectively supervise IRR? 8 Review prior examination reports, file correspondence for an overview of any previously identified rate sensitivity concerns, as well as the institution’s independent review for any recommendations or suggestions. 9 Review board or committee minutes for evidence of oversight, responsibility, routine management reports, and any identified rate sensitivity concerns. 10 Determine if there are any recent or planned changes in strategic direction and discuss with management the implications for rate sensitivity risks. 11 Review Rate Sensitivity policies. Policy guidance may be incorporated within Liquidity, Loan, Investment, Interest Rate Risk (IRR) or other policies, but taken as a whole, should provide sufficient guidance to management relative to the boards risk tolerances and oversight responsibilities. Policy formality and sophistication will vary, depending upon the level of the institutions risk and the complexity of its holdings and activities, but should: Provide authority and responsibility to an individual(s) or committee for establishing and maintaining an effective IRR management program which identifies, measures, monitors, and controls IRR; Identify the types of instruments and activities that m