Interest earned on assets less interest paid on liabilities. Interest rate shocks change it, so banks measure its sensitivity.
Where you will meet it
Net interest income comes up in 5 learning outcome notes across the FRM syllabus.
A few of them:
Banks FRM Part I · Financial markets and products
“Interest rate risk comes from assets and liabilities repricing at different times, which squeezes net interest income.”
Risk Management for Changing Interest Rates: Asset-Liability Management and Duration Techniques FRM Part II · Liquidity and treasury risk measurement and management
“A bank earns on assets and pays on liabilities whose rates and maturities rarely match, so a change in rates moves both net interest income and the market value of equity.”
Stress Testing Banks FRM Part II · Operational risk and resilience
“PPNR is pre-provision net revenue, which is net interest income plus fees minus non-interest expense.”
Risk Management for Changing Interest Rates: Asset-Liability Management and Duration Techniques FRM Part II · Liquidity and treasury risk measurement and management
“Here dNII is the change in net interest income and dr is the change in the interest rate.”
GARP does not endorse, promote, review, or warrant the accuracy of the products or services offered by Charta Learning, nor does it endorse any pass rates claimed by Charta Learning. Further, GARP is not responsible for any fees or costs paid by the user to Charta Learning. FRM® and GARP® are registered trademarks owned by the Global Association of Risk Professionals, Inc. The questions, explanations and study notes are written for this product and are not GARP curriculum material.