Use the Maturity Bucket Approach to calculate the Rate Sensitive Assets with a one-to-two years.

Use the Maturity Bucket Approach to calculate the Rate Sensitive Liabilities with a one-to-two years.

Use the Maturity Bucket Approach to calculate the change in CIMBs profits if interest rates increase from 8% to 11% for the next one to two years? (Write the final figure and mention if the profits in increase or decline)

Apart from the Gap Analysis, suggest any other way of reducing the interest rate risk in Financial institutions.

Section 2 (Managing Interest-Rate Risk) Financial institutions, banks in particular, specialize in earning a higher rate of retu on their assets relative to the interest paid on their liabilities. Below is a would- example of a Balance sheet from CIMB bank. Use the Income GAP analysis to answ the questions. Assets include assets with maturity less than one year, variable-rate mortgages, sho term commercial loans, portion of fixed-rate mortgages (say 10%) Liabilities include money market deposits, variable-rate CDs, short-term CDs, fede funds, short-term borrowings, portion of checkable deposits (20%) and a portion savings (10%) CIMB Bank Balance Sheet Million RM Assets Reserves and Cash Items 20 Million RM Liabilities 5 Checkable deposits Money Market Deposit accounts 25 Savings Deposits 5 CDs 5 20 Securities Less than 1 year 1 to 2 years Greater than 2 years 10 10 15 Residential mortgages 5 20 20 20 5 Variable rate Fixed rate (30 year) Commercial Loans Less than 1 year 1 to 2 years Variable rate Less than 1 year 1 to 2 years Greater than 2 years Fed Funds Borrowings Less than 1 year 1 to 2 years Greater than 2 years Bank Capital Total 15 15 10 10 25 5 Greater than 2 years Physical capital Total 10 5 140 140