An FI with a positive repricing gap expects interest rates to decrease.

Question

Quizplus · Accepted Answer

An FI with a positive repricing gap expects interest rates to increase. This is because their assets (loans and investments) will reprice at a lower rate than their liabilities (deposits and borrowings), resulting in a higher net interest margin. If interest rates were to decrease, the FI's liabilities would reprice at a lower rate than their assets, resulting in a lower net interest margin.

An FI with a Positive Repricing Gap Expects Interest Rates