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Interest Rate Risk Management of Commercial Banks in Bangladesh Based on IS (Interest Sensitivity) GAP Analysis
International Journal of Economics, Finance and Management Sciences
Volume 5, Issue 1, February 2017, Pages: 15-23
Received: Oct. 20, 2016; Accepted: Nov. 2, 2016; Published: Dec. 23, 2016
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Authors
Raad Mozib Lalon, Department of Banking & Insurance, University of Dhaka, Dhaka, Bangladesh
Md. Bazlul Kabir, Department of Banking & Insurance, University of Dhaka, Dhaka, Bangladesh
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Abstract
This paper on the interest rate risk management of a bank will provide a detailed picture of risk management of bank because it is one of the concerned factors for every bank. This study will also indicate any shortfall of bank in terms of interest rate risk management and offer suitable recommendations. Interest rate risk is the exposure of a bank's financial condition to adverse movements in interest rates. Accepting this risk is a normal part of banking and can be an important source of profitability and shareholder value. However, excessive interest rate risk can pose a significant threat to a bank's earnings and capital base. Changes in interest rates affect a bank's earnings by changing its net interest income and the level of other interest sensitive income and operating expenses. Changes in interest rates also affect the underlying value of the bank's assets, liabilities, and off-balance-sheet (OBS) instruments because the present value of future cash flows (and in some cases, the cash flows themselves) change when interest rates change. Accordingly, an effective risk management process that maintains interest rate risk within prudent levels is essential to the safety and soundness of banks.
Keywords
Irr, Nim, Nii, Is Gap, Car, Crm, Mcr, Rwa
To cite this article
Raad Mozib Lalon, Md. Bazlul Kabir, Interest Rate Risk Management of Commercial Banks in Bangladesh Based on IS (Interest Sensitivity) GAP Analysis, International Journal of Economics, Finance and Management Sciences. Vol. 5, No. 1, 2017, pp. 15-23. doi: 10.11648/j.ijefm.20170501.12
Copyright
Copyright © 2016 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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