Interest rate risk for banks arises largely from assets and liabilities that do not reprice at the same time.

Question

Quizplus · Accepted Answer

When banks have assets and liabilities with different maturities, they are exposed to interest rate risk. This is because if interest rates change, the value of their assets and liabilities may be affected differently, leading to potential losses or gains. Therefore, managing this risk is an important aspect of a bank's overall risk management strategy.

Interest Rate Risk for Banks Arises Largely from Assets and Liabilities