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Impact of Low Interest Rates on Financial Institutions

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Assignment: impact of low interest rates on financial institutions
 Interest rates have been near historically low levels for an extended period of time in advanced economies. From a monetary perspective, low interest rates reflect the current low growth and inflation environment. Next to their impact on the economy, interest rate levels and possible changes in interest rates also have a profound impact on financial institutions. The level of interest rates affects the valuation of assets and liabilities, and thereby net worth. Interest rates also affect profitability, as they influence funding costs and returns on financial assets. Moreover, interest rate risk is a key risk that risk managers take into account.  The effect of low interest rates may differ for different financial institutions, as a result of differences in balance sheet structure and business models. In this assignment you have to analyse the effect of low interest rates for a large bank  The focus is on the effect of low interest rates on valuations of assets and liabilities at market value, and thereby net worth (i.e. the amount by which assets exceed liabilities). Moreover, you also need to analyse the effect of low interest rates on profitability/business model (for banks)  Conclusions should summarise the effects and possible responses by the institution (e.g. risk management and/or business strategy).  The first section of your report should discuss the expected effects of low interest rates on the type of financial institution that you have selected (based on theory)  The second part should analyse the effect based on concrete publically available data for the institution that you have selected (e.g. in balance sheet data in financial statements)
Format assignment: - 12-15 pages A4 (excluding title page and references); 15 pages is a strict maxi-mum. - line spacing: 1 - Title page…...

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