Banks with time and value as their huge assets play pivotal role in shaping the economic condition of our country by keeping the economy safe, liquid, and revenue generating. Still the dynamism in the market environment, rising need for global trade and innovation in financial instruments exposes the financial intermediaries to unfavourable risk exposures. Awareness of time-varying changes in the value of banks’ risk positions to fluctuations in interest rates, credit spreads, foreign exchange rates, etc. helps in measuring the risk appetite of banking sector. In specific, the overall asset liability maturity pattern which is synchronised to the duration of treasury bills, bonds and innovative derivative instruments, plays a pivotal role in the bank risk management. Liquidity and solvency of banking industry is the major concern of any economy at any given point. Studying the time-varying impact of the major economic factors on the overall risk exposure of banks to its fundamental asset-liability maturity pattern has always remained important. The aggregate bank risk exposure calculated through market-model is an easy replication of its systematic risk capacity. But the breaking-down of systematic risk of a bank into specific risk factors enhances an in-depth understanding on the various dimensions of bank risk exposure.

The prime importance of revaluing the banks’ risk exposure is to strengthen the stability of financial sector which in turn stimulate economic growth of the country. Hence, the regulatory banks of all nations priorities assessment of risk at various time intervals to enhance financial stability. These financial risks are primarily divided into credit risk and market risk. Market risk further gets divided into equity risk, interest rate risk and exchange rate risk. There is enormous literature available in studying risk exposure of banks but very few are extended to measuring the time-varying impact of these risk factors on value of bank positions. Hence the primary purpose of this research study is the contemporaneous assessment of four major bank risks with publicly available market information. The second focus is to investigate the time-varying changes in the value of banks’ positions to the fluctuations in the multi-dimensional bank risk factors such as interest rate risk, credit risk, foreign exchange risk and equity risk.

We contribute to the banking literature by measuring the time-varying impact of bank risk factors namely interest rate risk, credit risk, foreign exchange risk and equity risk on the value of banks’ positions on various assets and liabilities. This can simply be called position exposures. From the above risk quantifications and measurement of exposures, it can be summed up that, irrespective of economic conditions, the maturity mis-management can always expose banks’ balancesheet to various losses. Along with the ill-management of asset-liabilities, the dynamism of market variables add on to the risk levels of banks. Hence, maintaining a safe level of maturity management and predicting risk tolerance levels, might help banks in devising proper risk management approach.