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Article
Hidden Risks Threaten Balance Sheets as Rate Volatility Returns
Interest rate volatility is exposing weaknesses in traditional balance sheet management frameworks, forcing banks to rethink structural hedging, deposit modelling, and governance. Drawing on lessons from the 2022-2025 rate cycle, the article explores how changing customer behavior, rising regulatory scrutiny, and evolving credit spread risks are reshaping asset liability management, while highlighting the need for faster decision-making and more dynamic risk responses.
Jun 08, 2026
Center for Financial Professionals ,
Tags:
ALM, Treasury and Liquidity Risk
The views and opinions expressed in this content are those of the thought leader as an individual and are not attributed to CeFPro or any other organization
- Sustained interest
rate volatility is exposing weaknesses in traditional balance sheet
management frameworks
- Structural hedges
have become a major driver of earnings stability for many banks
- Deposit behavior
since 2022 has challenged long-standing assumptions about customer loyalty
and pricing sensitivity
- Non-linear deposit
betas and faster digital migration are reshaping ALM models
- Regulators are
increasing scrutiny of behavioral assumptions and interest rate risk
frameworks
- Credit spread risk is
emerging as a first-order balance sheet concern rather than a secondary
consideration
- Institutions must
move beyond static scenarios and build dynamic response capabilities
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