IMPROVING INTEREST RATE RISK MANAGEMENT MECHANISMS IN COMMERCIAL BANKS

Isakov Janabay Yakipbaevich

GREEN ECONOMY AND DEVELOPMENT, 2026, vol. 4, issue 6

Abstract: Interest rate risk is one of the most critical financial risks influencing the stability, profitability, andlong-term sustainability of commercial banks. In an environment characterized by volatile financial markets,changing monetary policies, rising inflationary pressures, and increasing competition within the banking sector,effective management of interest rate risk has become a strategic priority for financial institutions. Fluctuationsin market interest rates can significantly affect banks’ net interest income, economic value of equity, liquidityposition, and overall financial performance. Consequently, commercial banks are required to developcomprehensive risk management frameworks capable of identifying, measuring, monitoring, and controllinginterest rate exposures.This study examines the theoretical foundations and practical mechanisms of interest rate risk managementin commercial banks and explores opportunities for improving existing management approaches. The researchis based on international banking standards, particularly the principles and recommendations of the BaselCommittee on Banking Supervision, as well as statistical data and analytical reports related to the bankingsector. Various interest rate risk measurement techniques, including gap analysis, duration analysis, assetliabilitymanagement (ALM), stress testing, and modern risk assessment models, are analyzed within the study.The findings indicate that effective interest rate risk management contributes significantly to enhancingfinancial stability, maintaining profitability, improving capital adequacy, and strengthening banks’ resilience toadverse market conditions. Furthermore, the integration of digital technologies, artificial intelligence, predictiveanalytics, and real-time monitoring systems has improved the accuracy and efficiency of risk assessmentprocesses. The study emphasizes that commercial banks operating in emerging economies should adoptadvanced risk management practices and strengthen regulatory compliance to mitigate the negative effectsof interest rate volatility. Based on the obtained results, several practical recommendations are proposed toimprove interest rate risk management mechanisms and support the sustainable development of commercialbanking institutions.

Keywords: commercial banks; interest rate risk; banking risk management; asset-liability management; Basel Committee on Banking Supervision; financial stability; profitability; stress testing; risk measurement; digital banking technologies (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:teu:ged000:v:4:y:2026:i:6:id:11339

DOI: 10.5281/zenodo.20835236

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