Mismatch

DEFINITION of 'Mismatch'

In general, this means to match incorrectly or unsuitably. In the banking world, it refers to a situation pertaining to asset and liability management. A mismatch occurs when assets that earn interest do not balance with liabilities upon which interest must be paid. For example, an asset that is funded by a liability with a different maturity creates a mismatch.

BREAKING DOWN 'Mismatch'

Also known as mismatched books, this situation is common in banking. For example, a bank may borrow for the short term and make long-term loans. Therefore they will fund 30 year mortgages with short term deposits, anticipating that the deposits will be rolled over.

RELATED TERMS
  1. Maturity Mismatch

    The tendency of a business to mismatch its balance sheet by possessing ...
  2. Unmatched Book

    An imbalance that occurs when the maturity of a bank's assets, ...
  3. Net Interest Income

    The difference between the revenue that is generated from a bank's ...
  4. Total Liabilities

    The aggregate of all debts an individual or company is liable ...
  5. Mismatch Risk

    1) A category of risk that refers to the possibility that a swap ...
  6. Liability Management

    Use and management of liabilities, such as customer deposits, ...
Related Articles
  1. Investing Basics

    Examples Of Asset/Liability Management

    In its simplest form, asset/liability management entails managing assets and cash inflows to satisfy various obligations; however, it's rarely that simple.
  2. Investing Basics

    Analyzing A Bank's Financial Statement

    Investors should analyze a bank’s interest rate risk and credit risk when analyzing its financial statement.
  3. Investing

    What's a Liability?

    A liability is a debt. It is an obligation that arises during the course of business and represents a third-party claim on the company's assets. A liability can arise in a number of different ...
  4. Professionals

    Current Liability Basics

    CFA Level 1 - Current Liability Basics. Learn the basic types of liabilities, including definitions for current and long-term liabilities, warranties, taxes and vacation-pay.
  5. Forex Education

    4. Learn The Different Liabilities

    Learning to read the balance sheet can provide great insight into the financial strength of a company.
  6. Economics

    Explaining Long-Term Liability

    A long-term liability is an obligation a company owes a year or more into the future.
  7. Fundamental Analysis

    Analyzing A Bank's Financial Statements

    A careful review of a bank's financial statements can help you identify key factors in a potential investment.
  8. Insurance

    Riding The Market Bubble: Don't Try This At Home

    Riding the bubble takes timing, a clear understanding of the market and, most of all, a lot of luck.
  9. Credit & Loans

    Credit Crisis: Historical Crises

    By Brian PerryThis chapter will provide an overview of historical financial crises and then explore the similarities between those crises and the 2008 credit crisis. An understanding of the common ...
  10. Investing

    Current Liabilities

    Current Liabilities are company debts due within one year or one operating cycle, whichever is greater. An operating cycle is the time it takes a company to purchase inventory and convert it ...
RELATED FAQS
  1. What is the difference between an expense and a liability?

    Learn what liabilities and expenses are, which financial statements they are listed on, and the differences between liabilities ... Read Answer >>
  2. Do banks have working capital?

    Learn the reasons why banks do not have working capital due to the lack of typical current assets and liabilities accounts, ... Read Answer >>
  3. How might a company's contingent liabilities affect its share price?

    Discover what contingent liabilities are, and how and to what extent such liabilities may have an impact on a company's share ... Read Answer >>
  4. What kinds of liabilities appear on the balance sheet?

    Learn what current and non-current liabilities are, the difference between the two, and examples of liabilities that a company ... Read Answer >>
  5. What are some examples of current liabilities?

    Examine some common examples of current liabilities a company may owe within a year or less in order to accurately assess ... Read Answer >>
  6. Which of the following statements is (are) true with respect to the factors that ...

    The correct answer is: d) (I) is incorrect because if interest rates are expected to rise, banks will generally "increase" ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center