A net interest margin (NIM) hedging solution designed to help financial institutions protect against a rising rate environment and stabilize liability costs for up to 10 years.
As the Federal Reserve Bank raises interest rates, net interest margin may contract as liability costs increase. Floors on variable rate loans and pre-payable longer-term CDs may exacerbate this problem. Most banks realize the nature of this problem and regulators are focusing their attention on "Sensitivity," or the impact of rising rates on banks’ income, liquidity and capital.
That's where PCBB's Funding Hedge Program comes in and allows your bank to hedge its net interest margin against the impact of rising rates and stabilize liability costs for up to 10 years. Designed as a prepaid asset versus a derivative, the program does not involve complex accounting or disclosures for your bank. It is simple and easy to use.
How it Works
Work with PCBB's experts to determine the portfolio hedge that works best for your bank
Sign a prepaid hedge agreement whereby your bank receives floating rate payments
Your bank pays a hedge fee to PCBB and receives collateral to secure the agreement
During the term of the hedge, PCBB will make periodic floating rate payments to your bank
Your bank carries the hedge as a prepaid asset—no Dodd Frank or hedge accounting issues