What are rate sensitive assets and liabilities?
Considering this, what are rate sensitive liabilities?
Rate sensitive liabilities are bank liabilities, mainly interest-bearing deposits and other liabilities, and the value of these liabilities is sensitive to changes in interest rates; these liabilities are either repriced or revalued as interest rates change.
One may also ask, how do I reduce asset sensitivity? Some general rules for making a bank less asset sensitive or more liability sensitive are:?Make some assets less sensitive:?Buy fixed rate securities instead of keeping the money in Fed Funds sold;?Add fixed rate loans instead of floating;?Swap floating rate loans for fixed.
Moreover, what is RSA and RSL?
Rate Sensitive Assets (RSA) = Rate Sensitive Liabilities (RSL) The most familiar example of re-pricing assets is loans that are about to mature or are coming up for renewal.
When rate sensitive assets exceed rate sensitive liabilities?
A negative gap, or a ratio less than one, occurs when a bank's interest rate sensitive liabilities exceed its interest rate sensitive assets. A positive gap, or one greater than one, is the opposite, where a bank's interest rate sensitive assets exceed its interest rate sensitive liabilities.