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To: Robert Douglas who wrote (5995)	6/23/1998 7:19:00 PM
From: Jess Beltz	Respond to of 10921

Robert, typically, although banks try to match maturities, it is virtually impossible for them to do, especially to the extent that they make loans like 30 year fixed-rate home mortgages. Now with the development of the secondary mortgage market in this country (the US), they can sell those loans and get them off of the books, and this makes maturity matching time oriented deposits against shorter term loans easier, although still at times difficult. I am willing to bet that the average maturity or duration of assets (the loan portfolio in particular) far exceeds the same measures for liabilities. The situation is much worse in Asia, where there is no secondary market in mortgages (although HK is trying to get one up and running right now) and very few interest rate hedging mechanisms. In HK, up to this juncture, only variable rate consumer loans have been available, but the rates can only be reset once or twice a year, so even there, they are more "sticky" than deposits. Whenever you have this classic maturity mismatch, and most banks in the world run it, rising rates usually mean funding costs go up quicker than revenues. You could also see that this represents a near-term contraction in the spread for the bank. The situation to which you refer is seems to me to be unique and I have not heard mention of it before (although I do believe you.) jess.