November 4, 2021

Dynamic Balance Sheet Modeling for Business Planning

September 21, 2021 | Jordan Taylor | UMB

The pandemic has caused an abundance of uncertain times. It’s becoming repetitive to talk about, but it’s of major importance for the banking industry. At one point, it looked like things were getting back normal, but then a new variant of the virus has created some confusion for the future.

For the upcoming budgeting season, we thought it would be beneficial to discuss some dynamic options for balance sheet models that we can run for banks. These models provide an idea of what rate sensitivity analysis could look like if banks wanted to compare different scenarios with different balance sheet totals.

Before we dive in, let’s see a quick market update from second quarter 2021 to now. There really hasn’t been too much change regarding interest rates, as you can see from the charts below. The effective fed funds target rate remained relatively unchanged between .08% and .10% (according to the St. Louis Federal Reserve website) while U.S. Treasury rates declined slightly.

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