Effect of Rising Interest Rates on Bank Profits?
Having trouble wrapping my head around this. Can someone please explain how financial institutions are affected by rising rates?
Much appreciated
Depends on the degree of asset sensitivity.
Also not too sure on the following but something I read once was that usually when interest rates, short term interest rates rise very quickly but then long term rates take longer to rise and usually occurs with the economy's gradual improvement, so this results in a flatter yield curve. Since banks use short term deposits to fund long term loans, this might result in net interest margin compression and actually be detrimental to banks.
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