Bank Analysis School eBook

The Securities Portfolio Impacts Every Component!

Capital

• Wide range of risk-weightings can impact capital ratios

Asset Quality Management

• Credit risk and potential for adverse classification

• Risk management: pre-purchase analysis, ongoing monitoring, etc.

Earnings Liquidity Sensitivity

• Interest Income; realized gains/losses

• Cash flow, marketability, pledging

• Term structure may contribute to or mitigate interest rate risk • Price volatility with rate changes

Learning Objectives

1 – Impact on Other Components

2 – Investment Types and Terminology

3 – Yield Curve and Credit Risk Premium

4 – Interest Rate Risk