A bank is liability sensitive,if its:
A)deposits and non-deposit borrowings are not affected by changes in interest rates.
B)interest-sensitive assets exceed its interest-sensitive liabilities.
C)interest-sensitive liabilities exceed its interest-sensitive assets.
D)loans and securities are affected by changes in interest rates.
E)None of the options is correct.

Question

Quizplus · Accepted Answer

A bank is liability sensitive if its interest-sensitive liabilities exceed its interest-sensitive assets, meaning that if interest rates increase, the cost of its liabilities will increase more than the income generated by its assets, resulting in lower net income.

A Bank Is Liability Sensitive,if Its