Analysis of Change Effect in the Market Interest Rate on Net Interest Income of Commercial Banks

The article presents an analysis and description of the methods of an income gap analysis and a duration gap analysis that enable assessing an interest rate risk of commercial banks also their policy of assets and liabilities management in the view of concordance of terms. On the basis of gap analysis methods applied to make an assessment of an interest rate risk and annual financial statements of the banks "Siauliai bankas" and "Medicinos bankas" for the period of 2006-2009, a theoretical simulation model of sensitivity of the net interest income to the changes in the market interest rate was developed and implemented in practice; the aim of the model - with the aid of gap methods and a sensitivity analysis to make quantitative assessment of the effect of the change in the interest rate on a net interest income, as hypothetically, there is a functional dependency between changes in the market interest rate and net interest income of commercial banks. Management of an interest rate risk in commercial banks is one of the "foundation stones" in management of banks assets and liabilities as it determines profitability of a bank. M. Jasiene (1998) describes in detail the interest rate risk and its potential effect on the structure of assets and liabilities. A. Lileikiene and J. Martinkiene (2004) in their research articles emphasise the importance of a choice of the strategy of assets and liabilities formation in commercial banks and tools for the management of an interest rate risk. Interest rate risk and its management tools are also described in N. Zaltauskiene's (2005), A. Lakstutiene's, A. Breiteryte's, D. Rumsaite's (2009) research works. There is a considerable body of research and studies on this topic by foreign authors. E. N. Murthy (2008), S. Priyank (2007) describe in detail methods of interest rate risk assessment, analysing values of assets and liabilities balance-sheet items of commercial banks. F. S. Mishkin (2007) provides mathematical methods for the assessment of the structure of assets and liabilities in commercial banks. Interest rate risk assessment methods and results of research are also described in specialised periodical publications that are publicly distributed, e. g. "GAP Analysis" bulletin published by the initiative of the US Central Bank.