by Michael Tichareva
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Michael Tichareva BCOMM (HONS.), FASSA, FIA, MBA
Chair of the International Actuarial Association Banking Virtual Forum and Executive Chairman & Senior Actuary – Claxon Actuaries International |
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In their normal banking activities, banks are in the business of maturity transformation, where they raise deposits and other forms of funding (liabilities to the bank) from those with excess cash and lend to those in need of loans (assets to the bank). This scenario exposes banks to various risks, key of which is mismatching risks between assets and liabilities, as liabilities are often of a shorter duration whilst assets are often of a longer duration.
Disclaimer:
This article represents the opinion of the author, and not necessarily the opinion of the AAE.
This article was published in The European Actuary No. 34 – June 2023
