Asset Liability Management

Overview

Asset Liability Management is the function of optimizing the banks mix of asset and liabilities in order to maximize NII as well as managing risk.

Asset Liability Management

Asset liability management is the process of structuring a banks balance sheet (that is choosing the mix of its assets and liabilities) in such a way as to achieve the banks objectives, in particular, the banks objectives as to which type of risk and the size of those risks.

• Risk ALM
• Strategic ALM
• Metrics
• Asset Modeling
• Liability Modeling
• Balance Sheet Optimization refers to the process of choosing the assets and liabilities to hold on a bank's balance sheet in order to optimize some criteria set by the banks management, such as the Return on Equity, subject to a set of constraints, such as risk constraints or leverage contraints.

Governance

• Risk Appetite Statement - Many banks adopt a risk appetite statement that is used to articulate how the banks board views risk and its appetite and limits of the various types of risk that the bank faces. The statement typically will involve specifying a set of measures that the board uses to evaluate the banks risk position and the acceptable limits (tolerances) of those metrics.
• Bank Asset Liability Committee (ALCO) - The Bank Asset Liability Committee is a bank committee that is responsible for setting the ALM policies of the bank. Typically the committee meets monthly and reviews the current risk position of the bank in order to validate that the bank is within the risk limits set by the committee.