The Education of a Value Investor
Asset Liability Management & Interest Rate Risk in the Banking Book - Part 2 of 4
Nov 15, 2024
Eric Schaanning, a thought leader in financial risk management, joins Guy Spier to dissect the role of small treasury teams in managing significant banking risks. They tackle complex topics like yield curves and net interest income, relating them to personal finance strategies. The conversation also delves into Basel Committee scenarios for interest rate shocks and explores the implications for current banking models. Listeners will gain practical insights into asset liability management, bridging theoretical concepts to real-world financial navigation.
01:41:45
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Quick takeaways
- Eric Schaanning emphasizes that a small treasury team can effectively manage substantial financial risks, illustrating the critical role of treasury functions in banks.
- The discussion of Delta Net Interest Income and Delta Economic Value of Equity highlights essential metrics for gauging banks' financial stability amid interest rate fluctuations.
Deep dives
Overview of Interest Rate Risk in the Banking Book (IRRBB)
The podcast begins with a focus on Interest Rate Risk in the Banking Book (IRRBB) and its significance in managing a bank's balance sheet. It emphasizes the importance of understanding how loans and advances to customers are funded, as these market instruments possess inherent risks that differ from liquid market assets. Key risks discussed include gap risk, basis risk, and option risk, all of which can affect a bank's profitability and overall financial health. These risks become particularly relevant in light of historical crises, such as the Silicon Valley Bank collapse, which exemplify the need for effective risk management strategies.
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