The macroeconomic configuration at the present time is conducive to sizeable interest rate exposures in the financial industry. Because virtually all firms are tempted to take the same risks (“herding”), there is also a very important systemic dimension. All firms will not be able to get out when expectations of future rates change – leading to “overshooting” in market interest rates or even illiquidity in interest rate hedging markets. 18 But how should we analyse these risks? The problem is that there is no widely agreed way of analysing the optimal degree of maturity transformation in an economy. Savers want their.