There are a number of standard calculations for measuring the impact of changing interest rates on a portfolio consisting of various assets and liabilities.
The most common techniques include: The assessment of interest rate risk is a very large topic at banks, thrifts, saving and loans, credit unions, and other finance companies, and among their regulators.
The widely deployed CAMELS rating system assesses a financial institution's: Capital adequacy, Assets, Management Capability, Earnings, Liquidity, and Sensitivity to market risk.
Interest rate risk is unquestionably the largest part of the sensitivity analysis in the CAMELS system for most banking institutions.
When a bank receives a bad CAMELS rating equity holders, bond holders and creditors are at risk of loss, senior managers can lose their jobs and the firms are put on the FDIC problem bank list.