The focus is on interest-rate risk management. Financial statements do NOT include any reports on interest sensitivity. Accordingly we will have to rely on the UBPR (https://cdr.ffiec.gov/public/ManageFacsimiles.aspx). Make sure to pick a bank such that its uniform bank performance report is available. Once you pick the bank, please do the following:
1. Calculate the Net interest margin over time. Discuss what is revealed in the variation of NII across time.
2. For a given time period, calculate the interest sensitivity ratio. Discuss the interest rate exposure for your bank. Is it asset or liability sensitive? What are the implications of the changes occurring across time? Discuss the effects if interest rates increase/decrease by 1 percentage point.
Then, go to . Under “select the type of reports” pick, Ranking and Statistics; then use the drop down menu to select derivatives under “Select report” and view this in percent of assets. For interest rate contracts, you are interested in those discussed in chapter 8.
3. Compare the use of derivatives over time?
4. Break down the use of interest contracts by type. Discuss the most used versus least used contracts.
5. Discuss the bank’s usage of the interest rate derivatives.
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