Asset-Sensitive vs. Liability-Sensitive
The single question that decides whether rising rates help or hurt your margin.
A balance sheet is asset-sensitive if its assets reprice faster than its liabilities, and liability-sensitive if its liabilities reprice faster. This is the most fundamental ALM positioning question.
What it means
- Asset-sensitive → when rates rise, asset yields move up before funding costs catch up, so net interest margin expands. Falling rates hurt. (Think lots of floating-rate loans funded by sticky, slow-to-reprice deposits.)
- Liability-sensitive → funding reprices first, so rising rates compress margin and falling rates help. (Think fixed-rate, long-duration assets funded by rate-sensitive deposits or borrowings.)
How it's measured
- Repricing gap — the difference between assets and liabilities repricing in a given bucket.
- NII sensitivity — modeled change in net interest income under ±100/200/300 bp scenarios.
Why it matters
It tells you, in one word, which rate environment is your friend — and whether you need to hedge. Deposit beta (how fast deposits chase rates) is the swing factor that can flip a bank from looking asset-sensitive to behaving liability-sensitive mid-cycle.
How PhxIQ relates
The policy-rate and curve panels show the rate environment; the rate-shock tool on /alm lets you sketch the NII direction for a sample duration. See also Net Interest Margin & Deposit Beta.