Liability Sensitivity
A balance-sheet configuration in which a banks liabilities reprice faster than its assets when interest rates change. A liability-sensitive bank suffers when rates rise (deposit and bond funding costs climb quickly while long-dated fixed-rate loans lag) and benefits when rates fall. Banks with large books of long-duration fixed-rate mortgages or fixed-rate commercial real estate loans funded by short-term wholesale debt are commonly liability-sensitive, and that mismatch is one of the structural fragilities exposed in 2023 when short rates rose rapidly.
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10Y Treasury · Altman Z-Score · Asset Sensitivity · Basel III · Bond ETF · Bretton Woods
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