As the Basel Committee on Banking Supervision has pointed out, it has become increasingly important to look beyond the traditional earnings and economic value effects and assess indirect interest rate effects as well. Taking a broader view of the potential earnings impact of changing interest rates, banks also need to take into consideration the growing share of (interest-sensitive) fee- based fi nancial services (loan servicing, asset securitization programs, pay- ments etc.). Further indirect effects stem from in the evolution of the balance sheet (structural effects) and from the downgrading of borrowers (credit rating effect). As a case in point, portfolio shifts.
