Rule on Interest Rate Risk Management for Banks

Summary

This is a CIMA regulatory Rule, dated November 2006, that sets out minimum requirements for how banks must manage interest rate risk. It was issued by the Cayman Islands Monetary Authority under section 34 of the Monetary Authority Law (2004 Revision) and is intended to be read alongside the related Statement of Guidance on Interest Rate Risk Management. The rule was formerly designated Rule 4(B).

• Scope: Applies to all banks licensed and regulated by CIMA under the Banks and Trust Companies Law (2003 Revision).
• Governance requirement: Banks must have board-approved strategies, policies and procedures for managing interest rate risk that are proportionate to the size, complexity and nature of the bank's business, including operating limits on interest rate exposures.
• Ongoing obligation: Banks must actively measure, monitor and control this risk on an ongoing basis.

The document does not set any specific filing deadlines or transitional periods; it is a standing conduct requirement rather than a one-off notice. Breach of the Rule exposes a bank to CIMA's enforcement powers under its Enforcement Manual and under the Banks and Trust Companies Law and Monetary Authority Law.

Key obligations

• A bank must establish, implement, and maintain strategies, policies, and procedures for interest rate risk management appropriate to the size, complexity, and nature of its activities, including setting operating limits for interest rate exposures.
• Such interest rate risk strategies, policies, and procedures must be approved by the bank's board of directors.
• A bank must take the necessary steps to measure, monitor, and control interest rate risk on an ongoing basis.

Applies to

banks regulated by the Authority under the Banks and Trust Companies Law (2003 Revision)