25 HќќѠіђџȱ юћјђџ юћѢюџѦ 2014 3. ȱ ȱȱȱ ¢ȱȱȱȱ re-pricing liabilities relative to earning assets? 4. ȱȃĚȄȱȱȱȱ ¢ȱȱȱ ȱ¢ǵ 5. ȱ ȱȱȱȱ ȱ how our balance sheet liquidity is ěȱ¢ȱȱȱǵ 6. What if we just want to look at ȱȱĚ ǵ ȱ ȱȱȬ making depends on thorough and meaningful data in a useable report format. The questions above are for consideration when assessing the ¢ȱȱȱ ȱȱ¢ǯ Risk, capital and stress tests. It makes sense to measure and monitor the relationship between unrealized losses and capital — and this extends to various measures of capital itself. For example if we apply the markto-mark adjustment for securities to risk-based capital measures, we can more closely capture a total picture of the bank’s relative risk. All else being equal, a bank that makes relatively few loans can sometimes justify a higher level of interest-rate risk than a bank with a high loan/deposit ratio. Similarly, well-capitalized banks with pristine asset quality can tolerate more interest-rate risk than those with high “Texas ratios.” Institutions should run stress tests on assumptions for non- ¢ȱȱȱ ȱȱ to identify exposure to rising rates and higher interest expense. Back tests and assumptions reviews ȱȱȱĚȱȱȱ are being modeled properly. The dynamics of balance sheet cash Ě ȱȱȱȱȱ ǰȱȱȱȱĚ ȱ ȱȱȱěȱȱ environments. Banks have again been given a “heads up” from examiners on interest-rate risk. With proper reporting tools, good policies and sound processes, the regulatory challenge can be met, and the potential risks managed for a smooth ȱęȱŘŖŗŚǯȱ Consultants to the Financial Industry Young & Associates, Inc. Liquidity Planning Strategic Planning Regulatory Assistance Stock Valuations Capital Markets Expansion & De Novo Bank Charters Internal Audit Information Technology Recruitment & Human Resources Lending & Loan Review Compliance Policy Development Serving Community Banks Since 1978 F. Howard Halderman, president of Halderman Farm Management Service Inc., Wabash, has been elected to the board of directors of First Merchants Corp. and First Merchants Bank, NA, Muncie. He is a graduate of Purdue University, ȱŘŖŗŘȱ ȱ ȱ FROM THE BOARD ROOM Alumnus and serves on the Purdue University College of Agriculture Ȃȱ ¢ȱ ǯȱ ȱ also is a board member of the Honeywell Foundation, Wabash ¢ȱ ȱȱ ȱȱ ȱ Inc.
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