BANK EXPOSURE TO INTEREST RATE RISK: A GLOBAL PERSPECTIVE

Jeff Madura and Emilio R. Zarruk

Journal of Financial Research, 1995, vol. 18, issue 1, 1-13

Abstract: In 1993, the Basle Committee on Banking Supervision considered whether to incorporate interest rate risk in risk‐based capital requirements for international banks. At issue was whether a bank's interest rate risk varies with the country of concern. While the effects of interest rate movements on U.S. banks are well documented, the effects on banks from other countries are not. We find that bank interest rate risk varies among countries, which supports the need to capture interest rate risk differentials in the risk‐based capital requirements. We also find that non‐U.S. bank values are sensitive not only to domestic interest rates, but to international interest rates as well.

Date: 1995
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