Interest-sensitive gap only looks at the impact of changes in interest rates on the bank’s net income. It does not take into account the effect of interest rate changes on the market value of the bank’s equity capital position. In addition, duration provides a single number which tells the bank their overall exposure to interest rate risk.
There are several limitations with duration gap analysis.
1) It is often difficult to find assets and liabilities of the same duration to fit into the bank’s portfolio. 2) Some accounts such as deposits and others don’t have well defined patterns of cash flows which makes it difficult to calculate a duration for these accounts. 3) Duration is also affected by prepayments by customers as well as default. 4) Duration analysis works best when interest rate changes are small and short and long term interest rates change by the same amount. If this is not true, duration analysis is not as accurate.
1) Loan sales provide the opportunity for getting rid of lower-yielding assets in order to make room for higher-yielding assets when interest rates rise. 2) Selling loans and replacing them with more marketable assets can increase a lender’s liquidity, better preparing the institution for deposit withdrawals or other cash needs. 3) Loan sales remove both credit risk and interest rate risk from the lender’s balance sheet and may generate fee income up front. 4) Purchasing bank can diversify loan portfolio and reduce risk.
1) Best quality loans are the easiest to sell which may increase volatility of earnings for the bank which sells the loans. 2) Loan purchased from another bank can turn bad just as easily as one from their own bank. 3) Loan sales are cyclical.
3. 在满足法定准备金账户要求时应考虑什么因素 1）Immediacy of Bank’s Needs
If a reserve deficit comes due within minutes or hours, the money position manager will normally tap the Federal funds...
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