Many bank chief executives are frustrated by the inability of their institutions to develop a consistent approach for interest rate risk taking. Notes one CEO: "Our strategies are driven by our underlying philosophy, which seems to change with our outlook on interest rates."

First Manhattan Consulting Group believes that many financial institutions should improve the consistency of their interest rate risk philosophy by making it independent of transient rate fluctuations. Only by so doing can institutions raise the return on the economic capital earmarked for rate positioning.

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