An Analysis of Commercial Bank Exposure to Interest Rate Risk

Abstract

This article evaluates some of the factors that may be affecting the level of interest rate risk among commercial banks and estimates the general magnitude and significance of this risk using data from the quarterly Reports of Condition and Income and a simple interest rate risk model. That risk measure suggests that the interest rate risk exposure for the vast majority of the banking industry is not significant at present. The article also concludes that a relatively simple model can be useful for broadly measuring the interest rate risk exposure of institutions that do not have unusual or complex asset characteristics.