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An Integrated Risk Management Methodology for Deposits and Loans

Author

Listed:
  • Gregory R. Hackworth

    (Bulls-Eye Solutions, LLC, Charlotte, NC 26173, USA)

  • Weidong Tian

    (Belk College of Business, University of North Carolina at Charlotte, Charlotte, NC 28223, USA)

  • Michael R. Vandenberg

    (Bulls-Eye Solutions, LLC, Charlotte, NC 26173, USA)

Abstract

This paper presents an integrated risk management methodology for measuring and managing the economics, risks, and financial resources/constraints related to deposits and loans in a commercial bank. Within a comprehensive and integrated framework, we develop valuation and risk models for all financial products on the bank’s balance sheet. Our proposed methodology aligns with regulatory requirements while offering a practical implementation. Unlike traditional industry practices, which often rely on fragmented and siloed risk management solutions, our approach integrates risk modeling across all aspects of the bank’s balance sheet. This new perspective provides a more accurate and consistent assessment of financial risks, improving the bank’s ability to navigate regulatory and economic challenges.

Suggested Citation

  • Gregory R. Hackworth & Weidong Tian & Michael R. Vandenberg, 2025. "An Integrated Risk Management Methodology for Deposits and Loans," Risks, MDPI, vol. 13(3), pages 1-26, March.
    • Handle: RePEc:gam:jrisks:v:13:y:2025:i:3:p:52-:d:1611070
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    References listed on IDEAS

    as
    1. Itamar Drechsler & Alexi Savov & Philipp Schnabl, 2021. "Banking on Deposits: Maturity Transformation without Interest Rate Risk," Journal of Finance, American Finance Association, vol. 76(3), pages 1091-1143, June.
    2. Richard Sheehan, 2013. "Valuing Core Deposits," Journal of Financial Services Research, Springer;Western Finance Association, vol. 43(2), pages 197-220, April.
    3. Dong-Hyun Ahn & Robert F. Dittmar, 2002. "Quadratic Term Structure Models: Theory and Evidence," The Review of Financial Studies, Society for Financial Studies, vol. 15(1), pages 243-288, March.
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