Banking risks must be considered together

The impact of credit and interest rate risk, the two most important dangers faced by commercial banks, must be measured jointly, research published by the Bank of England finds.

The research also shows that it is crucial to model the entire portfolio of a bank, including the re-pricing and maturity characteristics of assets, liabilities and off-balance sheet items.

The paper derives a consistent and general framework to measure the integrated impact of both risks on banks' portfolios. The

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