INTEREST RATE RISK IN BANKING – SOURCES AND EFFECTS

Igor Zivko
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Igor Zivko: University of Mostar

Economic Thought and Practice, 2006, vol. 15, issue 2, 199-214

Abstract: Interest rate risk is an important financial risk in banking business. Since the bank cannot be isolated from the influence of the interest rate risk, but at the same time, it can protect itself from the unfavourable risks of the interest rate trends, the bank management must understand the sources and effects of the interest rate risks. This paper will also show some possible effects of the interest rate risk in banking, which can be a protection mechanism, if perceived in time. Interest rate risk impact on the bank financial situation is seen through the influence on the economic and market value of the bank.

Keywords: bank; interest rate risk; interest rate risk sources; interest rate risk effects; ALCO (search for similar items in EconPapers)
JEL-codes: E43 (search for similar items in EconPapers)
Date: 2006
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