Final answer:
The statement is false because the equivalence in maturity does not eliminate interest rate risk due to differing interest rate structures and sensitivity to rate changes on the assets and liabilities of a bank.
Step-by-step explanation:
The statement that 'if the duration of all banks' assets with a maturity of greater than one year is similar to that of its liabilities with a maturity greater than one year, interest rate risk is nonexistent' is false. The concept of duration involves not only the matching of maturities but also the sensitivity of assets and liabilities to interest rate changes.
Even if a bank has assets and liabilities with similar maturities, the interest rates on these assets and liabilities may be structured differently, causing the bank to experience interest rate risk. Interest rate risk arises when interest rates move in a way that the interest income from assets does not change in the same proportion as the interest expenses on liabilities. For example, if a bank has fixed-rate loans (assets) and variable-rate deposits (liabilities), an increase in market interest rates could lead to higher interest payments to depositors without a corresponding increase in interest income from loans.