Company: KEY-PI
Filing Date: 2025-05-06
Form Type: 10-Q
Source: 0000091576-25-000058
Chunk: 42

Company: KEYCORP /NEW/
Filing Date: 2025-05-06
Form: 10-Q
Item: Item 2
Chunk 42
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 for the oversight and management of interest rate risk and is administered by the ALCO. The MTRM, as the second line of defense, provides additional oversight.

Net interest income simulation analysis. The primary tool we use to measure our interest rate risk is simulation analysis. For purposes of this analysis, we estimate our net interest income based on the current and projected composition of our on- and off-balance sheet positions, accounting for recent and anticipated trends in customer activity. The analysis also incorporates assumptions for the current and projected interest rate environments and balance sheet growth projections based on a most likely macroeconomic view. The modeling incorporates investment portfolio and swap portfolio balances consistent with management's desired interest rate risk positioning. The simulation model estimates the amount of net interest income at risk by simulating the change in net interest income that would occur if rates were to gradually increase or decrease from current levels over the next 12 months (subject to a floor on market interest rates at zero).

Figure 22 presents the results of the simulation analysis at March 31, 2025, and March 31, 2024. At March 31, 2025, our simulated impact to changes in interest rates was relatively neutral. The exposure to declining rates has changed from (1.21)% as of March 31, 2024 to (0.39)% as of March 31, 2025, while the exposure to rising rates has changed from (0.76)% as of March 31, 2024 to 1.41% as of March 31, 2025. The modest shift toward asset sensitivity was caused principally by the recent adoption of a new pricing model for indeterminate maturity interest-bearing deposits. The new deposit beta model incorporates more historical data and features that we believe more accurately reflect the behavior of our clients in rising and declining interest rate cycles. Key is actively managing the balance sheet to maintain desired IRR positioning in the current environment. Tolerance levels for risk management require the development of remediation plans to maintain residual risk within tolerance if simulation modeling 

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demonstrates that a gradual, parallel 200 basis point increase or 200 basis point decrease in interest rates over the next 12 months would adversely affect net interest income over the same period by more than 5.5%. Current modeled exposure is within Board-approved tolerances. If a tolerance level is breached and determined inconsistent with risk appetite, the development of a remediation plan is required to reduce exposure back to within tolerance.

Figure 22