What Is a Funding Gap?

Fund gap analysis is the bank's analysis of the difference between interest rate sensitive assets and interest rate sensitive liabilities. Used to measure the sensitivity of a bank's net income to changes in market interest rates. Funding gap is divided into three states: zero gap, positive gap and negative gap. Zero gap status, also known as book balance. If the bank is in a zero-gap state, then the change in returns is minimal during the planning period. Purely, in this state, if the floating rate asset and floating rate liability are reset at the same time, interest rate changes can eliminate market interest rate changes on the net. Impact of earnings. ^[1]