Refinance Risk

Risk that a bank will be unable to refinance maturing deposit liabilities when they come due at maturity, at acceptable prices and terms. When banks go to the market to refinance liabilities, the risk is that they may be unwilling or, in extreme rate volatility, unable to acquire deposits necessary for making new investments. Refinance risk applies to money market deposits and corporate debt, such as term debentures. The risk for the institution is that it may not be able to roll over those liabilities at an affordable rate.