Management of bank assets and liabilities to secure protection from interest risk
The paper defines the concept and basic types of interest risks paper and suggests that adverse movement of interest rates can have a negative impact for the bank on profit and loss account, cash flow and equity market. For this reason, it is especially important to establish a protection strategy from interest rate risks. Management strategy features of assets and liabilities are explained in the paper, especially managing the gap of interest-earning assets and liabilities and duration of assets and liabilities. On the basis of an analysis of basic indicators of Croatian banks’ assets and liabilities from 1993 to 2001, the author proposes guidelines of business policies for Croatian banks which would result in stabilisation of the net interest margin and maximise the banks’ equity market value.
Key words: bank, interest, interest risk, management of interest risk, gap between bank assets and liabilities