If interest rates rise by 5 percentage points,then bank profits (measured using gap analysis)will increase regardless of the income gap.

Question

Quizplus · Accepted Answer

Gap analysis in banking focuses on the difference between the amounts of assets and liabilities that reprice or mature within a certain period. If a bank has more rate-sensitive liabilities than assets, an increase in interest rates could actually decrease its profits, as the cost of paying interest on liabilities could increase more than the income from assets.

If Interest Rates Rise by 5 Percentage Points,then Bank Profits