The Impact of Structural Changes in Household Lending on Banks' Interest Rate Risk

This study examines how banks' interest rate risk has actually changed as fixed-rate loans have recently increased. Specifically, when measuring bank interest rate risk based on the Economic Value of Equity(EVE) criterion, the results show that a considerable number of banks experienced expanded interest rate risk in the medium-term period as interest-sensitive asset cash flows increased significantly compared to interest-sensitive liability cash flows, intensifying cash flow mismatches. Additionally, based on the short-term net profit volatility indicator(NII), it is difficult to draw uniform conclusions due to different funding structures among banks and high variance in risk values. However, for banks with high interest rate sensitivity on the funding side, the expansion of fixed-rate loans could serve as a factor that reduces interest rate sensitivity on the asset management side during interest rate increases, thereby decreasing net income. While the increase in fixed-rate mortgage loans has positive effects from a macroprudential perspective, it can act as a factor expanding interest rate risk for banks due to increased asset-liability cash flow mismatches. Therefore, banks need to strengthen interest rate risk management through advanced Asset-Liability Management(ALM), securing stable funding, and expanding medium- to long-term financing.