Bank Interest Rate Risk Stabilizing in Q1 2010 Per Echo Partners Bank Analysis

Share Article

Interest Rate Risk Grader Measures and Quantifies Bank Sensitivity to Interest Rate Changes; Allows Accurate and Informed Comparative Analysis. Updated Analysis Shows Bank Interest Rate Risk Moderating.

With interest rate volatility, it’s vitally important to identify bank earnings and valuations subject to outsized risk. Interest Rate Risk Grader simplifies the process of evaluating interest rate risk, and its impact on bank profitability and safety.

Echo Partners has announced Q1 2010 bank interest rate risk results calculated using the Interest Rate Risk Grader ( proprietary asset liability tool which allows users to evaluate bank risk and sensitivity to interest rate changes.

Generic bank interest rate risk fell compared with the prior quarter, as measured by the number of banks with earnings volatility exceeding several key thresholds. These expected earnings surprises are solely due to short term interest rate risk sensitivity. Meanwhile, banks at both ends of the interest rate risk quality spectrum began to revert to the mean.

The top rated banks, earning the highest possible score of 100, are shown on the Interest Rate Risk Honor Roll ( Out of 6,988 banks tested, only 156 banks achieved this honor, down from 191 banks at year end 2009.

Simultaneously, the number of the lowest rated banks (rated “Red”) also contracted. Red-rated banks, those most exposed to interest rate risk, fell sharply from over 18% of all banks at year end 2009 to a more modest 16.5% of all banks at March 31, 2010.

Interest Rate Risk Grader tracks key risk measures that project changes in bank funding, short term profitability, and long term value including cumulative gap, earnings at risk, and economic value of equity. Sophisticated banking techniques for interest rate risk measurement ( are used to provide a complete professional risk assessment.

Interest Rate Risk Grader distills arcane quantitative tools into a single numeric score, which is directly comparable between and among banks. And, for at-a-glance awareness, a simple green, yellow and red color code quickly denotes relative rank and risk.

Quote, Attributable to Howard Lothrop, Managing Director and Founder, Echo Partners:

“With interest rate volatility seemingly here to stay, it’s vitally important to identify banks with earnings and valuations subject to outsized risk. Our Interest Rate Risk Grader simplifies the process of evaluating interest rate risk, and its impact on bank profitability and safety.”

About Echo Partners
Echo Partners is a nationwide bank asset liability consulting firm specializing in applying modern tools to hedging interest rate risk. Echo Partners focuses exclusively on the community bank sector, offering asset liability, hedging, and pricing tools to help build bank profitability. Based in Cordova, TN, Echo Partners can be found at

Please contact Howard J. Lothrop, CFA, Managing Director and Founder of Echo Partners directly at 800-971-1378 x 201 or at howard(dot)lothrop(at)echopartners(dot)com for additional information.


Share article on social media or email:

View article via:

Pdf Print

Contact Author

Howard Lothrop
Echo Partners
800-971-1378 ext. 201
Email >
Visit website