Research Information System
Euroasia Congress on Scientific Researches And Recent Trends-VII, Baku, Azerbaijan, 6 - 09 December 2020, pp.83-84
One of the bank performance assessment components is the bank’s sensitivity to market
risk. The factors such as interest rate and exchange rate may lead to changes in the value of the
bank stocks and hence, the structure of some financial ratios affects the bank’s sensitivity to
market risk. In the literature, there are miscellaneous financial ratios that may be used to
measure the sensitivity to market risk, and 4 distinct ratios fit for the purpose were selected
within the scope of this study. These ratios are as follows: Fixed Assets/Total Assets, Net
Exchange Position/Equities, Liquid Assets (Foreign Currency)/Liabilities (Foreign Currency),
and Interest Incomes/Total Assets. Among these ratios, the Fixed Assets/Total Assets ratio
only is opposite direction to the sensitivity to market risk, and when a bank has a high number
of fixed assets, it is not affected by market movements, and its sensitivity decreases. All other
ratios are in the same direction with the sensitivity to market risk. A significant correlation is
expected between the bank’s performance value for the sensitivity to market risk and its beta
coefficient which is an indicator of systematic risk of the bank stock.