Interest Rate Risks and Their Impact on Banks' Financial Performance (An Analytical Study of a Sample of Banks Listed on the Iraq Stock Exchange for the Period 2005-2023)

Abstract

This research aims to analyze the impact of interest rate risk on the financial performance of banks, based on a sample of Iraqi commercial banks (Bank of Baghdad, National Bank of Iraq, Commercial Bank of Iraq, Credit Bank, Middle East Bank, Sumer Bank, Investment Bank, Gulf Bank, and Mosul Bank) during the period 2005-2023. Data for these banks were obtained from their annual reports published on the Iraq Stock Exchange. Simple regression was used to estimate the relationship between the two variables using the EViews 12 statistical software, specifically a pooled regression panel data analysis (Pooled OLS) model. The significance of this research lies in the substantial role that interest rate changes play in influencing bank profits and stability. Sudden fluctuations in interest rates lead to fluctuations in net interest margins, which negatively impacts the value of bank assets and liabilities, thus affecting the banks' ability to achieve stable profits. The research findings revealed that interest rate risk has a significant impact on bank performance, as it is one of the most prominent challenges facing banks. Based on these findings, the research recommends the importance of adopting risk management strategies, hedging tools, and diversifying income sources to contribute to the continued operation of banks and improve their financial performance in a volatile banking environment.