All banks are interested in maximizing the spread between their deposit and loan interest
rates. In this regard, Eurobanks are no different from domestic banks. All banks are also
concerned with managing risk, the risk associated with their assets and liabilities. Like all
intermediaries, Eurobanks tend to borrow short term and lend long term. Thus if the deposit
liabilities were reduced greatly, we would see deposit interest rates rise very rapidly in the
short run. The advantage of matching the term structures of deposits and loans is that
deposits and loans are maturing at the same time, so that the bank is better able to respond
to a change in demand for deposits or loans.