Question

When there is negative gap an increase in market interest rates could cause a/an?

Answer 1

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Conversely, a credit union has a negative gap when the amount of rate-sensitive liabilities exceeds the amount of rate-sensitive assets repricing during the same period. When a credit union has a negative gap, it is considered liability sensitive, and a decrease in market rates would likely cause an increase in NII.

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Answer 2

A negative gap is a situation where a financial institution's interest-sensitive liabilities exceed its interest-sensitive assets. A negative gap is not necessarily a bad thing, because if interest rates decline, the entity's liabilities are repriced at lower interest rates. In this scenario, income would increase