Consider the following simple bank balance sheet;

 

Assets	$ million	Liabilities and equity	$ million
Cash	20	Demand deposits	250
Interbank lending	150	Savings accounts	20
3-month T-notes	230	3-month CDs	230
2-year T-bonds	100	6-month CDs	350
5-year corporate bonds (floating rate) (repriced @ six months)	500	2-year CDs	425
2- year commercial loans (floating rate) (repriced @ six months)	475	Interbank borrowings	225
15-year variable rate mortgages (repriced annually)	350	Overnight repos	260
30-year fixed-rate mortgages (repriced monthly)	375	Subordinated debt: 7 year fixed rate	100
Premises and equipment	60	Equity	400

 

Assume demand deposits act as core deposits for the bank and the implicit cost of these accounts is close to zero whereas savings accounts are likely to be drawn down if interest rate rise, forcing the bank to replace them with higher yielding funds.

 

The bank's risk manager is considering the impact of interest rate changes for a six month planning period.

 

What is the re-pricing gap?