Interest Sensitive Liabilities


DEFINITION of 'Interest Sensitive Liabilities'

Any type of short-term deposit held by a bank that pays a variable rate of interest to the customer. Interest sensitive liabilities make up a significant amount of the assets of most banks. These liabilities include money market certificates, savings accounts and the Super NOW account.

BREAKING DOWN 'Interest Sensitive Liabilities'

Regulation Q of the Monetary Act of 1980 initiated a phaseout of interest rate ceilings by 1986. This, plus the elimination of most early withdrawal penalties have increased the volatility of demand deposit holdings in customer accounts. These changes have forced banks to learn new ways to manage their interest rate risk.

  1. Spontaneous Liabilities

    Liabilities of a company that are accumulated automatically as ...
  2. Interest Sensitive Assets

    Assets held by a bank that are vulnerable to changes in interest ...
  3. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  4. Liability

    A company's legal debts or obligations that arise during the ...
  5. Negotiable Order of Withdrawal ...

    An interest-earning bank account with which the customer is permitted ...
  6. Variable Interest Rate

    An interest rate on a loan or security that fluctuates over time, ...
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