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Business-7796475

Business-7796475 - ban’s assets and liabilities When the...

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Define maturity mismatch. Why is maturity mismatch important for understanding a bank’s risk and analyzing its performance? Maturity Mismatch is defined as “ The tendency of a business to mismatch its balance sheet by possessing more short-term liabilities than short-term assets and having more assets than liabilities for medium- and long-term obligations. How a company organizes the maturity of its assets and liabilities can give details into the liquidity of its position” Though maturity mismatch invariably means how much mature the organization capability is to borrow the process of mismatch generally allows diagnosing the liquidity position of the company by the investors. In consideration to banks the analyzing of the Mismatch technique is like bank losses its credibility when it’s there is lot of mismatch between
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Unformatted text preview: ban’s assets and liabilities. When the interest rate is charged and affects the Mismatched-Maturity and difference between interest rates charging and assets this also affects the bank credibility. The ban’s maturity-mismatched charge represents the interest rate acquired and helps in compensating the risk of the shareholders in that respect. If the valuation of ban is to be done its bank’s equity risk capital should also need to be considered. Bank’s risk weighing asset capacity (RWA) need to be analyzed while configuring the maturity-mismatch concept and most importantly bank providing various services should be based upon limited asset position and minimal risk capital....
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