OCC regulator warns on interest rate risk build-up

Fed policy, liquidity requirements and model herding all raise concerns

A senior US regulator has warned banks not to be complacent about the build-up of interest rate risk in the banking book as the Federal Reserve prepares to shrink its balance sheet.

“As this period of protracted low interest rates and low volatility goes on and on, things are becoming more risky. We think interest rate risk is even more prominent than it might have been a year or two ago,” said Kevin Walsh, deputy comptroller for market risk at the US Office of the Comptroller of the Currency