Source: SEFO (Funcas) | 20/07/2023
The article write by Ángel Berges, Marta Alberni y María Rodríguez discusses interest rate and liquidity risk in the banking sector, and how measuring and managing these risks is key to avoiding financial instability. Interest rate risk arises from the difference between the maturities of bank assets and liabilities, which exposes banks to potential losses due to movements in market rates. Liquidity risk, on the other hand, refers to a bank’s ability to meet its obligations in the short and long term.
The text compares the regulatory and supervisory approach of Europe and the United States to these risks, and highlights the importance of properly measuring and managing these risks to avoid financial instability. The text also discusses the sufficiency of the current regulatory and supervisory framework governing these risks and analyzes the European and US banking sectors to conclude that EU banks on the whole appear to be less exposed to interest rate and liquidity risk, but there is significant dispersion among various entities on both sides of the Atlantic.