To increase asset sensitivity, a bank can:
A) buy longer-term securities.
B) pay premiums on subordinated debt.
C) shorten loan maturities.
D) make more fixed rate loans.
E) All of the above.

Question

Quizplus · Accepted Answer

Asset sensitivity increases when a bank's assets reprice or adjust to interest rate changes more quickly than its liabilities. Shortening loan maturities (C) achieves this by allowing the bank to reset interest rates on its loans more frequently, aligning more closely with current market rates.

To Increase Asset Sensitivity, a Bank Can