Bank’s Interest Rate Risk Exposed: Value at Risk Analysis Reveals Sensitivity to Market Fluctuations

The [Bank’s Name] has released its latest value-at-risk (VaR) analysis, shedding light on the bank’s sensitivity to changes in market interest rates. The report reveals that the bank’s trading book is exposed to significant interest rate risk, with potential losses estimated at PLN 3,065 million at a 99% confidence level over a one-day time horizon.

Key Findings

• Maximum possible loss: PLN 6,903 million
• Minimum possible gain: PLN 18,556 million
• Sensitivity to interest rate changes:
  • 100-basis-point increase in interest rates: estimated loss of PLN 191 million
  • 100-basis-point decrease in interest rates: estimated gain of PLN 184 million

Analysis Highlights

The bank’s medium-term positions are particularly vulnerable to shifts in interest rates. The report reveals that a 100-basis-point increase in interest rates would result in an estimated loss, while a decrease of the same magnitude would result in a gain.

Equity Economic Sensitivity

The bank’s equity economic sensitivity was tested under assumed changes in interest rate curves, with the results showing a potential impact on the fair value of its assets and liabilities. The report reveals that:

• 100-basis-point increase in interest rates: estimated decrease in equity economic sensitivity by 0.35%
• 100-basis-point decrease in interest rates: estimated increase in equity economic sensitivity by 0.27%

Mitigation Efforts

The bank has taken steps to mitigate its exposure to interest rate risk, including:

• Diversifying its asset portfolio
• Implementing hedging strategies

However, the report highlights the need for continued monitoring and management of this risk to ensure the bank’s financial stability.

Full Report Available

The full report is available on the [Bank’s Name] website.