Rate increases don’t happen 200 bp at a time.
Competitors rates go up by 10 bp. If you don’t have rising rate strategy, when the small increases start happening you’ll respond by raising your rates in reaction to your competitor’s rate changes. If you act now, you can implement a segmentation strategy that holds down your cost of funds.
Rates may not be increasing, but they do in your Asset Liability model!
Whether the rate increase is immediate and permanent, or a rate ramp, you need a deposit pricing strategy for rising rates or you may overstate the increase in your cost of funds during rising rates, which will dramatically increase both your EVE (NEV) and income at risk calculations.
Caps and Floors are important on both sides of the balance sheet
Many institutions have caps and floors under variable rate products. For the first 200 bp change in rates, your yield on those products will move very little. Your cost of funds will move more if you don’t have a strategy, less if you do. A Deposit Pricing Strategy will help create spread during changing rates.