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Asset Liability Management
Transcript of Asset Liability Management
Product terms, pricing, and balance sheet mix must balance members’ product demands with the need to protect the equity of the credit union. Process of ALM Creation of parameters Identification of risk based on parameters ! ! ! ! ! RISK! Risk Measurement RISK! Risk Management Mitigation and minimization Risk Policies Risk Tolerance Asset Liability Committee (ALCO) •Composition of ALCO
•What they do
•Opportunities for Enhancing Net Worth
•Protection from Risk
PLACEHOLDER Assets Balance Sheet Liabilities Equity Loaning of funds to receive interest Accepting deposits with interest. Off-Balance Sheet Items Focus for these two Assets Liabilities Maturity Mismatch Liquidity risk Credit Risk Interest Rate Risk Operational Risk Assets Liabilities Asset-Liability
Management Probability of loss because of illiquidity. Probability of loss from fluctuations in interest rates. Usually composed of the senior management of the bank.
To receive and review reports on liquidity risk, market risk and capital management as covered in this report.
To identify balance sheet management issues like balance sheet gaps, interest rate gaps and profiles that are leading to under-performance.
To review deposit-pricing strategy for the local market.
Review liquidity contingency plan for the banks and financial institutions.