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.
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Specifically, the liquidity profile, asset credit quality and maturity mismatch are inconsistent with Fitch's view of the risk profile of a MMF.
'Hence if banks allocate their resources to long-term infrastructural projects (bridges, highways, ports, airports, etc.) and mega energy projects (such as large hydropower projects) there would be a maturity mismatch,' said the think tank.
Banks face maturity mismatch as long-term housing loans are currently being funded by short-term deposits which will not be a sustainable situation as the mortgage market grows to its potential, it said.
The bank will begin providing funding through the repo rate on June 1, but because of the maturity mismatch between the new benchmark and the currently used late liquidity window, the latter will be gradually phased out over the course of a week.
He further added that the role of PMRC is to develop the primary mortgage market by providing medium to long-term funding at fixed rates to the lenders thus, providing the lenders with risk management tools to alleviate the lenders' maturity mismatch and liquidity risks.
Speaking at the shareholders' agreement signing ceremony on Saturday, PMRC CEO N Kokularupan said that the availability of long-term funds would mitigate credit and maturity mismatch risks for banks.
"We need long term liability to reduce the maturity mismatch. We are an 'A' rated bank based in a double 'AA' rated economy.
The remaining three categories seek to assess the vulnerability of a nonbank financial company to financial distress: leverage, liquidity risk and maturity mismatch, and existing regulatory scrutiny.
Coupon will be paid on a monthly basis at a fixed rate, while proceeds will go for cutting maturity mismatch between the company's assets and liabilities.
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.
The criteria the FSOC would use to identify a troubled, systemically important "nonbank financial company" could include: 1) size, 2) lack of substitutes for the financial services and products the company provides; 3) interconnectedness with other financial firms; 4) leverage; 5) liquidity risk; 6) maturity mismatch and 7) existing regulatory scrutiny.
Moves to address liquidity management and what has been almost a structurally inbuilt maturity mismatch in Islamic finance are therefore to be most welcomed.