Sources of Bank Risks: Impacts and Explanations‪.‬

INTRODUCTION The sensitivity of commercial bank stock returns to interest rate risk has generated a substantial amount of attention, both within the academic arena and in the business world. Although this paper studies a multitude of risks to commercial banks, interest rate risk came to the forefront in the 1980's, in particular, with the massive number of Savings and Loan failures spurred on in large part by maturity mismatches between longer-term assets (loans) and shorter-term liabilities (deposits). In addition to the S&L failures, between 1985 and 1992, there were 1316 commercial bank failures in the U.S. involving over $170 billion in bank assets (FDIC). The magnitude of these failures and the instability they lent to the U.S. banking sector compounded many of the problems generated by the S&L failures.