Financial institutions such as U.S. savings institutions and commercial banks traditionally had fewer interest rate-sensitive ____ than ____ and therefore were adversely affected by ____ interest rates.

Question

Quizplus · Accepted Answer

Financial institutions traditionally have more interest rate-sensitive liabilities than assets, meaning they pay out interest on deposits (liabilities) at rates that can change more quickly than they can adjust the interest rates they earn on loans (assets). Therefore, when interest rates increase, the cost of their liabilities can increase faster than the returns on their assets, adversely affecting them.

Financial Institutions Such as U