Introduction Interest rate risk (IRR) refers to the potential decline in the value of financial assets—primarily bonds—due to unexpected changes in interest rates. For banks, managing IRR is critical to ensuring financial stability, profitability, and compliance with regulatory standards. Effective IRR management aims to maintain a bank’s risk exposure within acceptable limits across a range…
**Introduction** Liquidity risk represents a critical concern for banks, referring to the risk of being unable to meet financial obligations as they fall due, without incurring unacceptable losses or damage to reputation. Sound liquidity risk management ensures a bank’s ability to fund increases in assets and meet obligations as they come due, even under stressed…
Introduction Liquidity risk arises when a bank is unable to meet its financial obligations as they become due, thereby adversely affecting its financial stability. Effective liquidity risk management ensures that a bank maintains adequate funds to meet its obligations in a timely manner, thereby minimizing the likelihood of financial distress. This is particularly important because…