Regulators put much emphasis on a bank's sensitivity to interest rate movements, since many banks have liabilities that are repriced more frequently than their assets and are adversely affected by rising interest rates.

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Regulators focus on a bank's sensitivity to interest rate movements because banks often have liabilities (like deposits) that reprice or adjust to market rates more quickly than their assets (like long-term loans), making them vulnerable to rising interest rates which can squeeze their profit margins.

Regulators Put Much Emphasis on a Bank's Sensitivity to Interest