When a bank's repricing gap is positive, net interest income is positively related to changes in interest rates.

Question

Quizplus · Accepted Answer

A positive repricing gap means that the bank's interest-earning assets will reprice faster than its interest-bearing liabilities in a rising interest rate environment. This will result in an increase in net interest income for the bank as the interest earned on assets will increase more than the interest paid on liabilities. Therefore, net interest income is positively related to changes in interest rates in this scenario.

When a Bank's Repricing Gap Is Positive, Net Interest Income