Rate risk


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Rate risk

In banking, the risk that profits may drop or losses occur because a rise in interest rates forces up the cost of funding fixed-rate loans or other fixed-rate assets.

Interest Rate Risk

The risk of loss due to a change in interest rates. Interest rate risk is important to transactions like interest rate swaps. In such a transaction, the party receiving the floating rate will receive a smaller amount should the floating rate decrease. Interest rate risk is also important to bonds; if interest rates rise, the prices of bonds fall. This affects the secondary market for bonds; for example, if one purchases a bond with a 3% interest rate and the prevailing rate rises to 5%, it becomes difficult or impossible to resell the bond at a profit. Finally, interest rate risk is important to project finance. If interest rates rise, funding may not be available for a new loan for a project that has already started.
References in periodicals archive ?
B&F enters into strategic partnerships with regional and community banks throughout the U.S., ranging in asset size from USD500m to over USD30bn, providing a fully operational and professionally staffed client interest rate risk management group.
B&F enters into strategic partnerships with regional and community banks throughout the U.S., ranging in asset size from $500M to over $30B, providing a fully operational and professionally staffed client interest rate risk management group.
BSP orders banks to comply with rate risk management !-- -- Lawrence Agcaoili (The Philippine Star) - August 22, 2019 - 12:00am MANILA, Philippines The Bangko Sentral ng Pilipinas (BSP) is giving banks 18 months to comply with the new guidelines on managing interest rate risk, taking into consideration external shocks such as the US-China trade war and the weakening of the Chinese yuan, among others.
ENPNewswire-August 14, 2019--BSP Strengthens Framework for Managing Interest Rate Risk in the Banking Book
The Monetary Board, BSP's policy-making arm, has approved the guidelines on managing interest rate risk in the banking book (IRRBB) for banks/quasi-banks, which among others, require more detailed disclosures or a more granular data on their exposures.
The monthly summary report contains information about Fannie Maes monthly and year-to-date activities for our gross mortgage portfolio, mortgage-backed securities and other guarantees, interest rate risk measures, serious delinquency rates, and loan modifications.
The Reserve Bank of India draft norms have proposed non-resident Indians' (NRIs) access to the IRD market, allowing them to hedge their rupee interest rate risk flexibly using any available IRD instrument, RBI said in a release.
NORDIC BUSINESS REPORT-December 7, 2018-Wihlborgs Fastigheter reviews interest rate risk; restructures interest-rate derivative portfolio
Comment letters from banks, audit firms, and professional organizations support FASB's proposed addition of an interest rate benchmark for hedges of interest rate risk. The proposed benchmark rate, the Secured Overnight Financing Rate (SOFR), was developed by the Federal Reserve as an alternative for banks and other financial firms.
Analysis of the interest rate risk inherent in farmers' balance sheets has often focused on the direct impact of interest rate changes on asset values.
Low interest rates are "credit negative" for insurance companies worldwide, the report adds, though interest rate risk varies by country.
It could take a few years to implement changes that would allow the NCUA to add an S category to the agency's CAMEL rating system to monitor interest rate risk, agency staff told the board Thursday.