Effective management of cumulative gap

Not so easy to determine when specific types of assets and liabilities are overstated. Furthermore, the choice of planning period, during which carried balancing of assets and liabilities sensitive to changes in rates is quite subjective, which may lead to adverse effects when the individual balance sheet items fall into the intervals between periods of reassessment. 4. The transition from positive to negative gepu and vice versa requires a certain amount of time, and banks do not always have the financial instruments and mechanisms that would lead to rapid change. Projections are not met immediately, and changes in rates are achieved at once. Therefore, application of the strategy requires sufficient duration gepu percentage of cycles in order to have enough time to take advantage. Hence the effectiveness of the gap-down management. 5. The complexity of determining the degree of sensitivity to interest rate for certain financial instruments. 6. Ignoring the time value of money, (the creation of time periods to calculate gepu not take into account the differences between the movement of funds at the beginning and end of period). 7. Ignoring the effect of changes in value of assets and liabilities with a fixed rate when the interest rate. Summing up the above with respect to fundamental flaws, we can conclude that the method is based on the ALM gepu only gives recommendations on the desirability of changing or maintaining certain amounts of interest rate-sensitive groups of assets and liabilities in order to maintain the current profitability of the bank for changing interest rates or increase the current yield on anticipated changes in interest rates. The method makes no recommendations regarding the advisability of changes in assets and liabilities sensitive to interest rates. Category: Management Operations Commercial Bank