Banking-Book Rate-Risk Model Director

The mandate

Rapid rate changes moved deposits between non-maturity, term and investment products while mortgage prepayment behaviour broke historic relationships. The bank’s interest-rate risk view now depends on models whose segment definitions, commercial actions and back-testing windows no longer describe the portfolio. The defined problem is to redesign behavioural assumptions and management use so hedging and capital choices reflect uncertainty rather than a convenient stable duration.

The deliverables are a behavioural segmentation, deposit and prepayment model design, scenario-and-basis architecture, assumption governance, back-test framework, management-use protocol and remediation roadmap. The work must cover pass-through, floors, decay, migration, concentration, channel, customer relationship, mortgage incentive, curtailment, refinancing friction, basis and optionality. Independent validation retains authority over model conclusions.

Four milestones span five months: week four accepts the failure and data baseline; week ten approves segmentation and candidate behaviours; week sixteen completes back-tests, challenger scenarios and hedge-impact simulations; and week twenty-two delivers model specifications, governance, implementation priorities and the executive decision paper. Billing is tied to those four accepted milestones.

Acceptance requires model development and treasury to reproduce segment cash flows, validation to trace assumptions and limitations, and product teams to explain commercial actions embedded in behaviour. The final package must show sensitivity of economic value and earnings, hedge consequences, uncertainty ranges and performance under recent dislocation, with no unexplained overlay used merely to recover a preferred risk position.

The client provides account histories, rates, product and channel attributes, campaigns, mortgage contracts, prepayment events, hedge data, current models, validation findings and policy interpretations. The consultant does not validate or approve models, execute hedges, set deposit pricing, determine capital, submit regulatory returns, post valuation entries or operate production risk calculations.

Why this is external work

Model teams defend established specifications, product teams explain behaviour through campaigns and treasury needs a position quickly enough to hedge. Recent dislocation makes each partial view unstable. External behavioural-risk expertise can reconstruct segmentation from actual choices, test commercial explanations and specify uncertainty without owning validation or using a management overlay to manufacture a comfortable duration.

What you will own

• Analyse deposit migration, pass-through, decay, concentration, floors and channel behaviour across distinct customer relationships.
• Model mortgage prepayment, curtailment, refinancing incentive, friction, seasoning, geography and product structure under rate paths.
• Design basis and behavioural scenarios that preserve option asymmetry and expose concentration beyond central estimates.
• Establish data lineage, segment governance, assumption change, back-testing, performance thresholds and limitation treatment.
• Simulate impact on earnings, economic value, hedge choice, liquidity and capital across candidate models under severe non-parallel rate paths.
• Define management use that distinguishes model output, commercial judgement, overlay, validation status and accountable decision.
• Deliver specifications, challenger evidence, governance, remediation priorities and unresolved validation questions.

Candidate qualifications

• Has developed or remediated IRRBB behavioural models for material retail deposit and mortgage portfolios.
• Understands pass-through, decay, migration, floors, prepayment, basis, optionality, earnings and economic-value sensitivity.
• Has modelled deposit and mortgage behaviour through rapid rate dislocation where historic stable-period relationships and convenient customer segments failed.
• Can integrate product and customer evidence without allowing commercial narrative to replace statistical challenge.
• Has worked constructively with independent validation while preserving its authority and documenting model limitations.
• Produces specifications, limitation registers and management-use controls detailed enough for independent implementation, validation and regulatory scrutiny.

Non-negotiables

• Can maintain the Madrid hybrid cadence and attend every model-use council and challenger workshop.
• Will disclose relationships with banks, model vendors, validation firms, regulators and balance-sheet advisers.
• Brings live IRRBB behavioural model redesign; general interest-rate strategy or ALM reporting alone is insufficient.
• Will not validate models, execute hedges or use unsupported overlays to deliver a preferred risk result.

1. 49 words maximum. Which recent deposit behaviour would most challenge a stable non-maturity duration assumption?
2. 49 words maximum. How would you separate campaign-driven migration from structural rate sensitivity?
3. 49 words maximum. What challenger result would force a different hedge or capital discussion?