What is a dynamic gap?
The dynamic gap is something that is very concerned about banks that have to deal with ongoing loans and constant selections and deposits from customers. The space is the space between the assets and the liabilities that the bank has at the moment. This gap is always in the process of expanding and implementation, and therefore the analysis of dynamic gaps takes into account the fluctuating nature of the gap. Since banks are strongly involved in the loans offered to customers and owe other financial institutions, another part of this process is the management of interest exposure.
Financial institutions, such as banks, are the core of most economies because they are responsible for a transaction of a large amount of money between different entities such as other banks, businesses and citizens. Banks are also businesses themselves and as such are interested in profits. Because they are of dual responsibility for being the public and reaping profits for their ownership, banks must make sure that their capital reserves are well managed. One way to do dosTown is the process of analyzing dynamic gaps.
In contrast to the analysis of a static gap, which concerns the difference between assets and liabilities at one point, the analysis of dynamic gaps attempts to measure the gap over time and change the financial obligations of the bank. This must be ensured that the balance of assets and liabilities is well maintained. It is a complicated process for a bank that creates a large number of transactions with multiple entities.
The analysis of the dynamic gap requires monitoring all loans coming and based on the financial institution. These loans can have different interest rates attached to them. For example, the interest rate owed from a loan borrowed from another bank could differ significantly from the interest owed from the owner of a small business. Once different loans open and others are closed, they monitor these rates essential to maintain assets and obligations in order.
Another important part of administrationDynamic gaps is the expectation of customers. These selections may have a significant impact on the amount of capital reserves held by the bank at the moment. Although it is impossible to assess the timing of selections from different customers, banks should be ready to withstand the maximum impact of these selections at any time in the future. Assessing how these selections can be balanced by new deposits is a key part of the process management process.