Which of the following is a way to increase liability sensitivity?
A) Lengthen the maturities of loans.
B) Issue long-term subordinated debt.
C) Borrow more via noncore purchased liabilities.
D) All of the above.
E) None of the above.

Question

Quizplus · Accepted Answer

Liability sensitivity increases when an institution relies more on sources of funding that can change in cost quickly, such as noncore purchased liabilities. These are typically short-term and can have fluctuating interest rates, making the institution more sensitive to changes in interest rates. Lengthening the maturities of loans or issuing long-term debt would generally increase asset sensitivity or decrease liability sensitivity, not increase it.

Which of the Following Is a Way to Increase Liability