CHANGING ASSET/LIABILITY STRUCTURE OF SAVINGS INSTITUTIONS IN A DEREGULATED ENVIRONMENT
JOSEPH F. HUMPHREY
This paper examines how savings institutions have reacted to new asset/liability management powers granted under recent enabling legislation and regulation. The paper describes the rapid change in thrift liability composition that began with the money-market deposit account (MMDA) in December 1982 and the increased interest-rate risk that accompanied the subsequent shortening of liability maturities. Ironically, after deregulation, thrifts were structured even more into a mismatched position. After the massive thrift balance-sheet mismatch is measured, strategies useful in reducing thrift interest-rate risk exposure are evaluated in terms of size and immediacy of impact. Rather than reliance on minor balance-sheet adjustments which mistakenly are taken for effective asset/liability management, a comprehensive strategic plan is recommended Copyright 1984 Western Economic Association International.
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