How are community banks hedging interest rate risk?

80% of community banks manage interest rate risk using traditional portfolio management strategies.  PRM's Portfolio Optimization tool BondSwap can help you evaluate changes in your portfolio strategy, model the risk, cashflow and income impact of changing duration, tax mix or any other risk objective.  On a pre-trade basis,  we evaluate the best buy, sell or swap for your bank.

20% of community banks are hedging risk with interest rate swaps, and that number is growing as regulatory requirements are standardized and independent valuation and risk management services are widely available.

What are some common bank hedging strategies?

Fixed Rate Loan hedging - swaps to allow bank's to take the rate risk out of commercial lending.
Customer Swaps - back to back programs provide rate risk management and a bank fee engine.
Funding strategies - banks are moving away from fixed rate FHLB advances to create low cost, customized advance structures combining swaps and short term, variable rate advances.
Liability hedging - with rate at historic lows banks are hedging holding company debt and trust preferreds.