BOARD OF GOVERNORS 

OF THE 

FEDERAL RESERVE SYSTEM 

WASHINGTON, D.C. 20551 

DIVISION OF BANKING 

SUPERVISION AND REGULATION 

SR 12-2 

January 13, 2012 

TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH FEDERAL RESERVE 

BANK AND TO BANKING ORGANIZATIONS SUPERVISED BY THE FEDERAL 

RESERVE 

SUBJECT: Questions and Answers on Interagency Advisory on Interest Rate Risk 

Management

Applicability to Community Banking Organizations: This letter applies to all state member 

banks, bank holding companies, savings and loan holding companies, and U.S. offices of foreign 

banking organizations, including those with $10 billion or less in consolidated assets. In 

particular, the attached frequently asked questions document is being issued in response to 

questions received from community banks and should aid these institutions in managing their 

interest rate risk. 

On January 11, 2010, the Federal Reserve and the other financial regulators1 published an 

Advisory on Interest Rate Risk Management (SR letter 10-1, “Interagency Advisory on Interest 

Rate Risk”). Since its release, examiners and the industry have requested clarification of some 

specific recommendations in the advisory. In response to these questions, the financial 

regulators jointly developed the attached frequently asked questions (FAQs) document that 

provides interpretive guidance on some of these issues. 

The advisory, as well as these FAQs, are intended for use by banking organizations and 

supervisors as they assess organizations’ management of interest rate risk. While the questions and 

answers are applicable to all institutions, many of these questions originated from community 

banking organizations. This guidance should be applied, as appropriate, to all banking 

organizations supervised by the Federal Reserve, taking into account each organization’s size, nature, 

and balance sheet complexity. 

This letter and the attached FAQs should be distributed to state member banks, bank 

holding companies, savings and loan holding companies, and foreign banking organizations with 

                                                            

1

 The Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit 

Union Administration, Office of the Comptroller of the Currency, and Federal Financial Institutions Examination 

Council (FFIEC) State Liaison Committee. 
U.S. offices supervised by the Federal Reserve, as well as to supervisory and examination 

staff. For questions regarding this guidance, please contact Mary Aiken, Manager, Market, 

Liquidity, Credit, and Other Risk Policy, at (202) 721-4534; or Ricardo Crumble, Senior 

Supervisory Financial Analyst, Risk, at (202) 728-5852. In addition, questions may be sent via 

the Board’s public website.2

Michael S. Gibson 

Director 

Attachment: 

 Interagency Advisory on Interest Rate Risk Management: Frequently Asked Questions

Cross Reference: 

 SR letter 11-7, “Guidance on Model Risk Management” 

 SR letter 10-1, “Interagency Advisory on Interest Rate Risk” 

 SR letter 96-13, “Joint Policy Statement on Interest Rate Risk” 

                                                            

2

 See http://www.federalreserve.gov/apps/contactus/feedback.aspx.