BancPath^© Model

AMG offers interest rate risk reporting and consulting via BancPath, our proprietary Interest Rate Risk (IRR) model. The BancPath model is an outsourced solution that can be run on either a monthly or a quarterly basis. In addition, we have bridged the gap between the ease and reliability of an outsourced solution and the flexibility of an in house model. Our secure web portal allows you to download IRR information to Excel for further review, and provides access to multiple ancillary reports and spreadsheets to assist your team in testing various loan and deposit pricing strategies. You can also customize your report set to provide relevant reports to your board, your management team, your pricing committee, your auditor and your regulator, as needed.

The BancPath model is designed to be a turn-key service that meets all regulatory guidance, as we use your data to calculate assumptions, including those for deposit betas, loan betas, non-maturing deposit lives, and prepayment speeds. We also include templates for ALCO meeting agendas and minutes. With a proprietary model, we are able to offer rare flexibility within an outsourced solution.

In addition to reporting, ongoing consulting is included with the price of the service. Your AMG consultant is available as needed to review your reports, risk position, policies, pricing strategies, and exams. Our goal is to become a trusted partner in managing your balance sheet. As our slogan says, "the only measure of our success is yours."

The reports generated in the model are designed to be a comprehensive and turn-key analysis of the balance sheet. Rather than simply meeting regulatory requirements, the reports provide management and the board with a view of current and projected risk, as well as reviews of performance and pricing efficiency in all major balance sheet categories. In addition, the report package is constantly changing in response to regulatory guidance, client requests, and exam trends. Below is a sample table of contents from a recent report package.

View Comprehensive Report Sample

As stipulated in the regulatory guidance on interest rate risk, the BancPath model measures short-term interest rate risk by simulating a bank's net interest income over a multi-year period through a wide range of interest rate scenarios (including rate ramps and shocks up and down 500 basis points as well as several non-parallel scenarios). The model is able to incorporate both static and dynamic balance sheets, as well as custom risk limits and custom rate scenarios.

View Sample Income Simulation Reporting

In addition to short-term interest rate risk, the model also measures long-term interest rate risk through a market value of equity calculation. In this process, the current balance sheet position (including balances, rates, and durations) is marked to market based on current market offering rates for similar instruments. The market value of equity can be compared to bank-specific risk limits for minimum levels and volatility.

View Sample Market Value of Equity Reporting

The majority of bank reporting is accounting based and backward looking. AMG's goal is to provide insight that allows management and board discussions to focus on what is coming as opposed to simply reviewing what has already happened.

View Sample Forecasted Performance Reporting

While most ALM systems focus on duration, AMG focuses on the aspect that we can control – pricing. Pricing decisions determine the bank's risk profile and marginal profitability. Since the BancPath model uses instrument-level data, we can provide several reports that measure recent pricing against market and peer rates. Adjusting this behavior allows banks to manage risk and squeeze extra basis points of profit out of normal monthly activity.

View Sample Pricing Efficiency Reporting

Since liquidity risk is a significant component of asset liability management, most ALM models now include some form of liquidity reporting. However, using instrument-level data, the BancPath model can take it further and provide static ratio reports and forecasted liquidity levels with stress tests. This element covers another reporting function that is being handled somewhere in the bank and can now be automated via the normal monthly data feed for the AMG service.

View Sample Documentation

The recent trend in interest rate risk modeling is that it's not the risk position that gets you in hot water. It's the modeling process. Because of this, approximately half of the BancPath report package includes an addendum that documents all inputs in the model. Reports are provided that reconcile database files to general ledger accounts, list all settings and assumptions, and document the basis of any assumptions. For example, a "Beta Calculator" is included to show how pricing relationships are determined.

View Sample Forecasted Performance Reporting

One of the downsides to using an outsourced ALM model is that you typically lose the ability to dynamically model strategies to gauge the impact to both risk and income. To bridge this gap, we developed a separate module for what-if testing. This module is in excel format. This way, the integrity of the risk management process is maintained while still giving maximum user flexibility in using the model as a decision-making tool.

View Sample What If Module Report

Finally, perhaps the most important component of AMG's BancPath© service is the ongoing consulting that is included. One of AMG's consultants will work with you throughout the process, from generating good data to understanding the model outputs to implementing pricing strategies. Our consultants work with community banks daily and can provide valuable insight into tactics that are working, tactics that are not working and recent trends in exams and audits. We are as involved in the process as you want us to be and aim to become a trusted partner in managing your balance sheet. We, like you, measure success with results. The value of the service is easy to see when we track our clients against the rest of the industry.

View Sample Executive Summary