•        Stress-test across multiple rate scenarios, including steepeners, flatteners, and inversions
•        Avoid concentration in long-duration fixed-rate assets without hedging
•        Improve understanding of deposit behaviour beyond contractual assumptions
•        Focus on optionality, flexibility, and diversified funding during uncertain rate periods
•        Build stable deposits through customer relationships, not just pricing
•        Leverage analytics and capital markets instruments to enhance funding resilience
•        Shift IRRBB from compliance-driven to a strategic, decision-making tool
•        Align treasury and business strategy for better risk visibility and execution

Ahead of the upcoming Balance Sheet Management Europe conference, we spoke with Tihomir Bublic to gain his perspective on the evolving challenges facing balance sheet leaders. In this interview, he shares insights on navigating interest rate volatility, shifting deposit dynamics, and the growing importance of strategic, data-driven decision-making in building resilient and future-ready balance sheets.

What would you advise as the best practices for organisations who are looking to structure their balance sheet to remain resilient across multiple interest rate scenarios, and where do you see the most significant vulnerabilities arise?

Resilience requires stress-testing across a range of scenarios — not just parallel shifts, but steepeners, flatteners, and inversions. On the asset side, avoid excessive concentration in long-duration fixed-rate exposures without adequate hedging. On the liability side, invest in genuinely understanding deposit behaviour rather than relying on contractual repricing dates. The most common vulnerabilities arise from overly optimistic deposit beta assumptions, underestimated optionality in assets and liabilities, and a disconnect between the IRRBB framework and actual business strategy.

Given the current position in the interest rate cycle, what strategies should institutions be using to manage the ‘shoulder’ period and balance margin pressure with risk exposure?

The key in the shoulder period is disciplined optionality. Rather than making large directional bets on the rate path, institutions should ladder asset maturities, diversify funding, and preserve flexibility to act as opportunities emerge. Deposit pricing strategies deserve critical reassessment, and existing hedge positions should be recalibrated to reflect updated rate expectations rather than rolled over mechanically. Agility and scenario preparedness matter more right now than conviction on a single outcome.

How should institutions build and maintain stable, relationship-driven deposits, and to what extent do you see them still being reliant on price-led competition to attract and retain funding?

Stable deposits come from a value proposition that goes beyond rate. Price-sensitive customers attracted solely by rate will leave when a better offer appears — genuine stickiness comes from the quality of the overall relationship: transaction accounts, service breadth, and long-term trust. For retail clients, core current and savings accounts remain the foundation of stable funding — these are typically the most behaviourally stable deposits and should be actively nurtured through consistent engagement, digital convenience, and personalised service. That said, being materially uncompetitive on price will drive outflows regardless of relationship strength. The goal is reaching a threshold of price competitiveness and differentiating on everything else — particularly for corporate clients, where credit availability and advisory quality often outweigh rate.

Looking ahead, how can financial institutions leverage innovation and more creative balance sheet strategies to sustain profitability and funding resilience in increasingly volatile rate environments?

Advanced analytics are improving the precision of deposit behaviour forecasting and hedging decisions. On the funding side, greater use of capital markets instruments — covered bonds, securitisation, sustainability-linked issuances — is reducing reliance on deposit funding alone and broadening the investor base. Dynamic pricing tools are enabling more responsive rate-setting across both assets and liabilities. Institutions that combine strong analytics with organisational agility to act on insights quickly will be best positioned in a volatile environment.

As interest rate cycles become less predictable, how will firms need to evolve their approach to interest rate risk in the banking book to ensure long-term stability and competitiveness?

IRRBB needs to evolve from a compliance exercise into a genuine strategic management tool. ALCO discussions should be more scenario-rich and directly inform business decisions, not just ratify limit reports. Modelling should move toward probabilistic frameworks that better capture the range of plausible outcomes. Most importantly, treasury and business lines need to work in genuine partnership — rate risk should be considered at the point of product design and pricing, not managed after the fact. Long-term competitiveness comes from institutional agility: clear exposure visibility, fast decision-making, and effective execution.