Maturity mismatch

Maturity mismatch

In the context of hedging, maturity mismatch arises when a hedging instrument does not match the maturity of the underlying assets thus creating an imperfect hedge. In the context of balance sheets, maturity mismatch arises when there are more short-term liabilities than short-term assets to cover the liabilities with.
References in periodicals archive ?
Announcing the transaction, EBRD Director for Insurance and Financial Services Noel Edison said: We are pleased to deepen our cooperation with Finansbank by providing this new medium-term funding to help the bank manage the maturity mismatch that remains a challenge for the Turkish banking sector and limits SME financing.
An increase could mean many things, including the substitution of assets that are less sensitive to risk with ones that are more sensitive, a larger maturity mismatch, or a drop in the value of assets.
Basically, the maturity mismatch between assets and liabilities could be analysed for both risks.
First, the maturity mismatch between the mortgages and the issued notes resides in the trust (as does the risk inherent in a cross-currency swap).
Bakker and Schrijvers (2000) reported a maturity mismatch of approximately 8.
Secondly, commercial banks often get short-term financing from abroad and sell it as long-term credit, which causes a maturity mismatch and banks become vulnerable to unexpected volatilities.
The second paper, by Deger Eryar, investigates the impact of the currency and maturity mismatch in the private sector in Turkey on the exchange rate risk that is captured by exchange rate volatility.
Those methods include monitoring measures of leverage and maturity mismatch at financial intermediaries, examining asset valuations, underwriting standards for loans, and eyeing credit growth for signs of a credit-induced buildup of systemic risk.
Credit challenges include a significant balance sheet maturity mismatch and a high degree of asset concentration.
Associate Operations Officer, International Finance Corporation Private Enterprise Partnership for Africa (IFC PEP Africa), Wambui Chege, at a conference in Lagos, last year, remarked that the role of a mortgage liquidity facility is basically to develop the primary mortgage market by providing funds to mortgage lenders at better rates and longer tenors, thus facilitating affordability; provide longer term funds to mortgage lenders, reducing maturity mismatch between housing loans and sources of funds and; ensuring mortgage loan standardisation.
A maturity mismatch, in fact, puts in danger the success of the whole project.
On the liquidity front, Islamic banks have a more pronounced maturity mismatch than conventional banks.