gap management, also known as gap management, is a strategic measure to maximize the spread between bank assets and liabilities during the period of interest rate changes. Its basic approach is to adjust the asset-liability portfolio structure of variable interest rate and fixed interest rate with the change of interest rate, and achieve the goal of maximizing profits by changing the size of the capital gap.

1. The funding gap is equal to the difference between interest rate sensitive assets (IRSA) and interest rate sensitive liabilities (IRSL) in quantity. Interest rate sensitive assets refer to floating interest rate assets, while interest rate sensitive liabilities refer to floating interest rate liabilities.

2. Funding gap =IRSA-IRSL, interest rate sensitivity coefficient =IRSA/IRSL, and net interest income = interest rate change × funding gap.

Extended information:

The basic methods of funding gap are:

1. With the change of interest rate, adjust the asset-liability portfolio structure of variable interest rate and fixed interest rate, and achieve the goal of maximizing profit by changing the size of funding gap. When the interest rate rises and gradually turns to the high-profit stage, banks should establish a positive funding gap. A positive gap indicates that some interest-sensitive assets are financed by fixed-rate liabilities.

2. With the increase of interest rate, more short-term assets fluctuate at a higher market interest rate, while relatively few liabilities fluctuate at a higher market interest rate, and the net interest income increases with the increase of market interest rate.

3. The exact reflection of interest income on the change of market interest rate is determined by the relative share of floating interest rate assets purchased by fixed interest rate liabilities. By increasing floating interest rate assets and reducing interest rate sensitive liabilities, the positive gap strategy can be realized. The biggest positive capital gap should appear before the interest rate cycle reaches the highest point.

4. When the peak of the expected interest rate is coming, we should seize the time to expand the loan according to the market interest rate and try to change the funds into long-term loans with fixed interest rate. After the investment securities expire, we should immediately reinvest.

if the debt interest rate is high, the term should be shortened as much as possible to avoid the risk of falling market interest rate. When the interest rate drops and gradually turns to a low-profit stage, banks should adopt a negative gap strategy. Before the interest rate cycle reaches the peak and sufficient liquidity.

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