Disclosure of the Interest Rate Risk in the Banking Book of Listed Banks

Abstract

This paper proposes an analysis of banks’ balance sheet, in order to appraise the public disclosure of information on interest rate risk. The aim is to verify market analyst resource to get filling information about this element, owing to the increasing consideration for interest rate risk, revealed by national and international supervisory authorities. This sound control develops from the impact of this kind of risk on bank profitability, and sometimes stability.We initially present a brief discussion concerning the most important theories on interest rate risk evaluation and management. After that, the first part of the study examines the law in force about banks’ disclosure on their level of interest rate risk. The study continues by checking up consolidated balance sheet, over the period 2003-2004, for a set of Italian quoted banks, belong to Mib30 index, with special awareness to the Report on Group Operations. At last we present a comparative exercise, wherein we compare the level of interest rate risk reported on bank Report on Group Operations, to the risk profile assessed by applying to different quantitative balance sheet information the evaluation models for the measurement of interest rate risk exposure, as accepted on literature.